How to Present Your IT Budget

Here’s how to make your next budget presentation a winning proposition.

Do Your Homework
For many CIOs, the budget presentation itself is anticlimactic because the budget has already been debated thoroughly during the preparation phase. By the time the CEO sees it, there should be no surprises on either side of the table.

Therefore, CIOs need to view the entire planning process as a chance to communicate with the business side. That means at minimum 60 to 90 days of parsing numbers, organizing projects and setting priorities. The CIO should spend some of this time on diplomatic sorties like lunch meetings with the CFO or with department heads, in order to size up specific priorities, preferences and potential trouble spots on which IT has an impact.

Susan Cramm, an executive coach who was both a CIO and a CFO (and is a CIO columnist), recommends CIOs break their budget into two categories: project-based services and utility-based services. Project services are typically simple to explain—these are the projects the business units want or will get obvious benefits from. Because they can be tied to business results, their purpose is typically clear.

Utilities cover things like the help desk, network costs, software maintenance, hardware and the like that constitute 60 percent to 70 percent of typical IT spending. “It’s a huge number, and that number is a mystery to the organization,” Cramm says. Thus, it’s also the number that causes the most tension between IT and the business side. “The CIO says, Why can’t you just trust me? Why wouldn’t you expect to have to maintain those systems?” Cramm says. “The business side says, That’s a huge, hairy old number—why can’t you explain it to me?”

She suggests CIOs present utility costs as if they were an outsourcer, on a per-department basis, whether it’s for e-mail usage, help desk calls or the network.

Some CIOs manage their budgets as portfolios of investment opportunities in order to lend structure to a budget planning process. Thought it sounds complex, it can be done with a spreadsheet. “It helps you build a business case,” says Keith Kerr, a director at consultancy Robbins-Gioia.

Describing the IT budget as a series of investments that businesspeople can choose from is especially valuable when a company doesn’t have the luxury of normal planning cycles, notes Monte Ford, senior VP and CIO at American Airlines. During his six years as American’s CIO, the company has made a major acquisition, suffered through the teeth of an industry-shaking downturn, endured a recession and struggled with high jet fuel prices. Ford says his budget allocations may shift by as much as 20 percent in a typical year, and managing via portfolio helps him track all the changes. He also makes sure to give the CEO and CFO at least one budget update during the year, which helps the IT department stay on top of how the budget is changing over time.

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