ITBudgetingCh15

ITBudgetingCh15 - nd Extracted from The Executives Guide to...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Extracted from The Executive’s Guide to Information Technology, 2 nd edition. John Baschab & Jon Piot, John Wiley & Sons, 2007, DePaul 24x7 books for instruction use Chapter 15: IT Budgeting and Cost Management Overview This chapter presents a practical overview of IT budgeting and cost containment practices for the CIO. In creating the department budget, the CIO must analyze a large number of variables and balance multiple competing priorities, while devising the most cost-effective approach for delivering mission critical services. Because of the impact the budget has on the IT manager's ability to run an effective department, budget creation is one of the most important jobs an IT manager has. The chapter is organized in four key sections: 1. Budget components: Key components of the IT budget and the typical ratios of spending in each component. 2. Budget process: Two processes for completing the annual budgets. 3. IT cost drivers: An overview of key cost drivers in the budget and strategies for reducing costs. 4. Additional IT budget considerations: Managing capital expenditures, cost audit practices, contingencies planning, managing the budget, chargeback mechanisms, lease/buy decisions, and handling out-of- budget business unit requests. The first section describes key components of the IT budget, such as software, hardware, labor, and what ratios between the components the CIO should expect to see. The process section presents two methods for creating the budget and compares their merits. The cost drivers section covers key items that drive IT costs that affect the year-to-year change in the operating and capital budgets. Next, the chapter presents a number of strategies for minimizing IT costs, especially infrastructure and capital expenditures. Finally, the chapter presents a number of key management considerations for the IT manager to contemplate, such as lease versus buy decisions, audits, chargeback mechanisms, and so on. Why This Topic Is Important At a basic level, the CIO is judged on the department's output versus operating and capital input required. The lower the capital input required for the same high output, the better the ratio, and the actual effectiveness of the IT manager is judged to have increased. Effective management of capital is of prime concern to both senior executives and the IT manager; thus, it is a topic of high importance. Successful management of the IT department depends on the CIO's ability to operate a fiscally sound unit. It also entails the CIO making good decisions about spending priorities and ensuring that these spending priorities are aligned with the direction of the business. A good CIO also ensures that the bulk of discretionary spending is focused on fulfilling the demands of business units and in support of projects and initiatives focused on revenue- generating activities. CIOs may not have formal training or education in the business and budget management processes, and
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/11/2011 for the course ECT ect535 taught by Professor Susichan during the Fall '11 term at DePaul.

Page1 / 19

ITBudgetingCh15 - nd Extracted from The Executives Guide to...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online