www.techfoundation.org techconnect curriculum 2006-2007 it budgets that don't bite: a template...
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www.techfoundation.org
TechConnect Curriculum 2006-2007
IT Budgets that Don't Bite:
A Template for IT Budgeting
Presented by:Kathleen Sherwin
Director, Programs & External AffairsTechFoundation
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TechConnect Curriculum 2006-2007
AbstractSince technology began to find its way into nonprofits in the 1980’s, budgeting for IT has been a problem. Many nonprofits still have no distinct IT budget or budgeting process, let alone separate capital, operations, and support budgets. This presentation argues that preparation of an IT budget is a critical step both toward controlling IT costs and increasing the usefulness of IT systems. Through the use of standards, templates, and industry experience, nonprofits can develop IT budgets with relative ease, and should.
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TechConnect Curriculum 2006-2007
Purpose of Presentation• The purpose of this presentation is to
encourage nonprofit managers to develop and follow IT budgeting strategies and practices, resulting in more effective systems and better control of costs. By presenting IT budgeting as a process and using budget templates, attendees should be able to initiate this process in their own organizations.
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TechConnect Curriculum 2006-2007
Goals/Objectives
Attendees will:• Know and apply Total Cost of Ownership & IT
Life Cycle concepts in their agencies• Learn the 6 steps to developing an IT budget• Have spending standards against which to
compare their budgets
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TechConnect Curriculum 2006-2007
Strategic Technology Vision
Before you begin your budgeting process, you will need a Strategic Technology Vision, including:
• How technology will support your mission• Management buy-in• List of each manager’s priorities• Assessment of current IT systems and
support
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TechConnect Curriculum 2006-2007
The Vision Team
IT Staff Program Staff
ED/Board
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TechConnect Curriculum 2006-2007
Hard and Soft CostsHARD
• Hardware• Software• Professional services• Personnel• Training• Telecommunications• Supplies & Incidentals• Environment• Maintenance Cost
SOFT• User time – using• User time - fixing• Helper time• Management time• Inefficiencies
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TechConnect Curriculum 2006-2007
Budget Line Items
A. Hardware
B. Software
C. Professional services
D. Personnel
E. Training
F. Telecommunications
G. Supplies & Incidentals
H. Environment
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TechConnect Curriculum 2006-2007
Budget Columns
HardwareSoftwareServicesLaborTrainingTelecommunicationSupplies &
IncidentalsEnvironment
Item Maint. New Total
PC’s
Servers
Hubs/Switches
Routers/F’wall
Peripherals
Other
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TechConnect Curriculum 2006-2007
Five Concepts Underlying IT Budgeting
A. Projection from current expenses
B. Total Cost of Ownership (TCO)
C. IT Life Cycle
D. Benchmarking against peer organizations
E. Mission-driven, top-down planning
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TechConnect Curriculum 2006-2007
Projection from Current Expenses
• What is it? Start with current costs, add inflation, add/subtract anticipated projects
• Pros: easy to understand and do, easy to calculate, generally pretty accurate, generally a straight-line cost increase
• Cons: no room for new solutions, no measure of effectiveness, easy to hide costs, no challenge for income, sometimes miss opportunity to recognize cost savings
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TechConnect Curriculum 2006-2007
Projection from Current Expenses
For example: We spent $1,000 per month for phone lines and service for 50 staffers, so we need to budget $1,100 per month next year to support 55 staffers.
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TechConnect Curriculum 2006-2007
Total Cost of Ownership• What is it? TCO accounts for all aspects of providing
information technology, including purchasing, operations, training, maintenance, support and network services over the expected lifetime of the system.
• Pros: few hidden costs, encourages multi-year planning, can be made to reflect individual agencies
• Cons: many numbers are guessed or assumed, often not connected to mission, means many things to many people, easy to double-count or underestimate costs
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TechConnect Curriculum 2006-2007
Total Cost of OwnershipFor example:
We need to create a new networked office for 5 people. Assuming a 4 year economic life, we need to budget the following:
Item Year 1 Year 2 Year 3 Year 4
System Consultant $1,000 0 0 0
Cost of hardware/software
$7,500 0 0 0
Hardware updgrades 0 0 500 1000
Networking $500 300 300 500
Training $500 0 0 200
Support $1,000 500 500 1,000
Maintenance/Repair 0 500 750 1500
Total 10,500 1,300 2,050
4,200$18,050 = TCO
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TechConnect Curriculum 2006-2007
Life Cycle• What is it? Every system goes through purchase,
installation, maintenance, enhancement, and decommissioning, and should have corresponding costs
• Pros: budgeted costs vary according to what you specifically plan to do
• Cons: still a lot of guesswork, need a lot of history to develop estimation basis, not connected to mission
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TechConnect Curriculum 2006-2007
Life CycleFor example:
We try for 3 year replacement, but we bought a bunch of computers under a grant 3-1/2 years ago. We need to replace all of those old machines now, which are more than 1/3 of our total machines. We need to buy 11 plus 2 for new people, a total of 13 machines.
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TechConnect Curriculum 2006-2007
Benchmarking• What is it? Compare the systems you have
to your peers’ systems and use their experience as a basis for budgeting
• Pros: based in reality, can provide many insights
• Cons: easy to overlook differences between agencies, hard to get information
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TechConnect Curriculum 2006-2007
Benchmarking
For example:
Our peer agencies spend about $600 per year per employee on PC hardware; we have 100 employees, budget $10,000 for PC hardware.
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TechConnect Curriculum 2006-2007
Mission-driven• What is it? The classic top-down approach.
Decide what you need to achieve, find out how technology supports the goals, budget to the goals.
• Pros: easiest to justify, makes technology an integral part of agency work
• Cons: very hard to translate goals into technology, distant from reality
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TechConnect Curriculum 2006-2007
Mission-drivenFor example:
Words for Nerds run successful, popular programs, but needs to increase advocacy and awareness. We are adding 2 staff members for that purpose. We need to do all we do now plus have 2 more people, which is why we’re adding 2 computers.
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TechConnect Curriculum 2006-2007
Baseline Costs1. Determine current actual costs and cost
allocations
2. Compute your agency’s TCO
3. Compute your agency’s cost for each year of life cycle
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TechConnect Curriculum 2006-2007
The Six Steps1. Develop baseline
2. Develop technology vision statement, decide on new project for coming year
3. Project based on baseline & projects
4. Compare results with your Total Cost of Ownership (TCO)
5. Compare results with Lifecycle plan
6. Compare results with peer agencies
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TechConnect Curriculum 2006-2007
Hardware DetailItem Maint. New Total
PC’s
Servers
Hubs/Switches
Routers/Firewall
Peripherals
Other
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TechConnect Curriculum 2006-2007
Software DetailItem Maint. New Total
Licenses
Maint. Agreements
Applications
Other
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TechConnect Curriculum 2006-2007
Services Detail
Item Maint. New Total
Service contracts
Consultants
Web developer
Applic. Developer
Tech support fees
Offsite storage costs
Other
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TechConnect Curriculum 2006-2007
Labor Detail
Item Maint. New Total
Payroll
Fringe
Stipends
Temps/Coverage
Other
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TechConnect Curriculum 2006-2007
Training DetailItem Maint. New Total
Books, CD’s, publs
Conferences
Classes
In-house classes
On the job
Other
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TechConnect Curriculum 2006-2007
Telecommunications Detail
Item Maint. New Total
Data lines
Internet access
Hosting fees
Cells, PDAs, WiFi etc.
Other
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TechConnect Curriculum 2006-2007
Supplies Detail
Item Maint. New Total
Cables, tapes, etc.
Ink & toner
Paper & stock
Other
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TechConnect Curriculum 2006-2007
Environment DetailItem Maint. New Total
Share of rent
Climate control
Security
Utilities
Other
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TechConnect Curriculum 2006-2007
The Six Steps (reprise)
1. Develop baseline
2. Develop technology vision statement, decide on new project for coming year
3. Project based on baseline & projects
4. Compare results with your TCO
5. Compare results with Lifecycle plan
6. Compare results with peer agencies
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TechConnect Curriculum 2006-2007
ResourcesTCO worksheets and information – school based: http://www.cosn.org/tco/
Similar ideas, different tools - http://www.iaete.org/tco/
An online curriculum - http://www.rms.net/tut_bud_map.htm
The economist’s point of view: http://www.educause.edu/ir/library/html/cem9624.html
From a nonprofit point of view: http://www.techsoup.org/articlepage.cfm?articleid=197&topicid=11&CFID=1665978&CFTOKEN=1601270
A life-cycle article: http://www.lsit.ucsb.edu/funding/lifecycle.php
Another corporate point of view: http://www.costblaster.com/it.htm
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