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CXO PERSPECTIVES - How to Get Your Budget Approved

By Raghavan Rajaji

April 01, 2002 — CIO — The relationship between CIO and CFO can sometimes be a tenuous one. Not because of any generalized ill will on either part, and certainly not because of any great difference in overall objectives. Both roles, after all, are working for the success of the corporation. The trick is that CIOs and CFOs need something from each other, but they can’t always be certain they’ll get it. CIOs need the approval of their CFOs to get funding for IT investments, while CFOs need assurance that those investments will produce real business value for the company.

Naturally, the budget-approval process is where this all comes out. I’ve worked in the CFO role for almost 20 years, spanning three different corporations. Based on that experience, I can tell you that there are certain things I look for in a good budget, as well as red flags that make me think twice. Let me tell you how to get your budget approved.

Trouble Ahead?

In my opinion, IT budgets are no different from any other kind of budget. In today’s business environment, IT is no longer just overhead. It’s part and parcel of the business, so technology projects should be considered and analyzed the way all other business projects are, subject to the same rules and requirements.

That said, there are a few red flags that I look for in any budget, whether it comes from the CIO or the vice president of sales.

Half the story. There are few things more distressing to a CFO than being told up front about only part of the costs involved in a proposed project. The surprise ending comes later, when a bunch more money is suddenly needed to keep things going. For example, it’s not unusual to see a budget that includes the software and hardware costs of an IT project but not the additional costs for ongoing maintenance or consultants required to do the implementation. I saw this happen once in the context of a major ERP project. People underestimated the maintenance costs and did not mention them up front. Then, once we were in the thick of it, suddenly it came to light that we needed four additional people to maintain the system. That kind of thing does not make your average CFO happy. In addition, it means a loss of credibility for the CIO.

Far from average. Another thing I watch for is a request for a budget increase by some percentage that is dramatically different from the rate at which the overall business is growing. For example, if the company is growing at roughly 30 percent a year and someone requests a 200 percent budget increase, I do a double take. And it works the other way too?a request for just an inflation adjustment when the rest of the business is growing rapidly also makes me wonder. Not that either of those necessarily means there’s a problem, mind you?they just makes me want to look more closely.

 

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