it budgets that don’t bite: a template for it budgeting
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IT Budgets that Don’t Bite: A Template for IT Budgeting. Presented by: Kathleen Sherwin, Director of Programs and External Affairs TechFoundation. Abstract. - PowerPoint PPT PresentationTRANSCRIPT
April 4-6 2007Washington DC
Presented by:Kathleen Sherwin,
Director of Programs and External AffairsTechFoundation
IT Budgets that Don’t Bite:A Template for IT Budgeting
TechConnect Curriculum 2006-2007
Abstract
Since 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.
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.
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
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
TechConnect Curriculum 2006-2007
The Vision Team
IT Staff Program Staff
ED/Board
TechConnect Curriculum 2006-2007
Hard and Soft Costs
HARD Hardware Software Professional services Personnel Training Telecommunications Supplies & Incidentals Environment Maintenance Cost
SOFT User time – using User time - fixing Helper time Management time Inefficiencies
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
TechConnect Curriculum 2006-2007
Budget Columns
Hardware
Software
Services
Labor
Training
Telecommunication
Supplies & Incidentals
Environment
Item Maint. New Total
PC’s
Servers
Hubs/Switches
Routers/F’wall
Peripherals
Other
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
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
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.
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
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 upgrades 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
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
TechConnect Curriculum 2006-2007
Life Cycle
For 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.
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
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.
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
TechConnect Curriculum 2006-2007
Mission-driven
For 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.
TechConnect Curriculum 2006-2007
Baseline Costs
1. 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
TechConnect Curriculum 2006-2007
The Six Steps
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 Total Cost of Ownership (TCO)
5. Compare results with Lifecycle plan
6. Compare results with peer agencies
TechConnect Curriculum 2006-2007
Hardware Detail
Item Maint. New Total
PC’s
Servers
Hubs/Switches
Routers/Firewall
Peripherals
Other
TechConnect Curriculum 2006-2007
Software Detail
Item Maint. New Total
Licenses
Maint. Agreements
Applications
Other
TechConnect Curriculum 2006-2007
Services Detail
Item Maint. New Total
Service contracts
Consultants
Web developer
Applic. Developer
Tech support fees
Offsite storage costs
Other
TechConnect Curriculum 2006-2007
Labor Detail
Item Maint. New Total
Payroll
Fringe
Stipends
Temps/Coverage
Other
TechConnect Curriculum 2006-2007
Training Detail
Item Maint. New Total
Books, CD’s, publs
Conferences
Classes
In-house classes
On the job
Other
TechConnect Curriculum 2006-2007
Telecommunications Detail
Item Maint. New Total
Data lines
Internet access
Hosting fees
Cells, PDAs, WiFi etc.
Other
TechConnect Curriculum 2006-2007
Supplies Detail
Item Maint. New Total
Cables, tapes, etc.
Ink & toner
Paper & stock
Other
TechConnect Curriculum 2006-2007
Environment Detail
Item Maint. New Total
Share of rent
Climate control
Security
Utilities
Other
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
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
TechConnect Curriculum 2006-2007
Contact Information
Kathleen Sherwin
Director, Programs & External Affairs
TechFoundation
617.354.7595