5 Critical Questions to Answer for Your 2020 IT Budget

5 Critical Questions to Answer for Your 2020 IT Budget

We receive many questions in the fourth quarter regarding establishing an IT budget for next year. While there are certain tax implications that should be reviewed with an accountant, answering the five questions below will allow you to have a more predictable IT cost in 2020.

1. Have you updated your IT Roadmap?

An IT Roadmap is your guide to deploying technology in your organization to support company goals. This document is dynamic in that completed items need to come off and new items need to be added. The Roadmap should show what initiatives are being undertaken, when they are planned and how they will be accomplished. An IT Roadmap should also include budget items to be part of a company’s overall IT budget.

2. Where is your current technology in its lifecycle?

A major component of your IT budget is related to the scheduled replacement of hardware and software according to a prescribed lifecycle.

Server hardware and networking equipment has an expected useful life of roughly five years while computers and laptops range between three and four years. As those time-frames are exceeded the likelihood of breaking down increases, the renewal of warranty may not be available or is costly and new equipment introduces new features as well as more robust resources.

Microsoft has an expected lifecycle for its products of ten years. In the first five there is mainstream support and the second five years is extended support. Its products receive updates and patches to fix bugs and security issues as well as introduce minor feature upgrades. 2020 will see the end of Server 2008, Windows 7, Office 2010 in terms of extended support. Continuing to use those products introduces security risk and can limit productivity of staff.

Applications Software goes through a regular lifecycle of versions which may also impact server and database software. Updates and upgrades need to be budgeted for regarding licensing, hardware, operating and database software replacement and professional services. Application software providers provide advance guidance on updates and upgrades of future versions and should be reviewed annually.

3. Are you expecting to grow or transform the business in 2020?

IT budgets are comprised of Run, Grow and Transform components. The above lifecycle budget items are a subset of the Run component. Organizations that are planning to grow by adding products or geographic coverage or capability, will need to allocate adequate resources to address additional application software licensing, user hardware or server resources for applications or data storage. Organizations which are transforming the way they do business will be reviewing new technology options for new capabilities, process re-engineering or research and development. This might include reviewing cloud vs. premise options for applications or prototyping/modelling software applications.

4. How are you expecting to align IT with business initiatives in 2020?

Strategic Planning for organizations includes clarifying vision, gathering and analyzing information, formulating a strategy with initiatives, implementing the strategy and evaluating and controlling the process. Gathering and analyzing information about IT resources will help to determine if existing resources can be realigned or need to be augmented or replaced as well as identify limiting issues of IT as they relate to the strategy initiatives of the strategic plan. Examples include improving service or reducing cost of operations whereby IT might align with these initiatives by delivering tools or analyzing data which will require IT budget items.

5. How much more are you going to be spending on security in 2020?

We are in the most challenging time of IT security. Bad actors are continuing to expand their attacks as businesses’ attack surfaces expand with cloud-based applications, remote workers and falling behind on the IT lifecycle. Security initiatives to protect data; client, employee and intellectual property and meet government or industry compliance requirements will increase budget dollars related to security. Advanced firewalls, anti-malware, encryption technologies, mobile device management and employee training are all part of a layering approach to keep data and resources safe. An annual Security Risk Assessment (SRA) will reveal the current status of the risk associated with technology to business operations and vulnerability scanning will provide the top three to five priorities to be addressed.

Business continuity plans will include expanding budgets for data backup and cyber and business interruption insurance.

As reported in the 2016-2017 Deloitte Global CIO Survey concerning IT budgeting organizations are spending various percentages of revenue for IT operations. By answering the above five questions, organizations will have a head start on implementing a budget framework to increase the predictability of IT costs in 2020.

Scott Cooper is the President of Tower 23 IT, an IT outsource solution for small to medium businesses specializing in protecting client health and financial data to meet privacy, compliance and security requirements in the healthcare, legal, financial, real estate and insurance industries. Scott can be reached at scottc@Tower23IT.com or 858.877.6219.