How to Present Your IT Budget

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

When he presents his technology budget to senior management, Edward Granger-Happ likes to talk about a ’57 Chevy.

“I tell them that we have to polish it and take care of it, and [because] it’s a ’57 Chevy, we’re living on borrowed time, especially if we’re using it for the daily commute,” says Granger-Happ, CTO at Save the Children.

The spiffy car is a metaphor for a legacy system in use at the foundation, and it helps Granger-Happ make several points. First, it puts the old system in a context everyone on the business side understands. Second, it helps him make the argument that systems not only come with maintenance costs but that those costs grow (and take up more of his budget) as the systems age. Third, he can tie maintaining or replacing the “Chevy” to his strategic IT plan, priming the group for a future discussion.

Granger-Happ says his approach to talking about the IT budget usually gets him what he wants at the $400 million nonprofit. His budget for the coming year is $4.7 million. But he also knows that when the foundation sees fund-raising tighten, as is the case for the coming fiscal year, he knows he won’t get major new initiatives funded, and he doesn’t ask.

Though it may take up less than an hour at the executive committee or board meeting, the budget presentation is one of the most important messages a CIO has to deliver. What a CIO says and doesn’t say—during both the actual presentation and in the months leading up to it—sets the course for IT not just for the next year but, where new investments are concerned, for years to come.

Yet despite its importance, few elements of such a presentation are universal. What matters in a budget presentation depends on the priorities of the company and the personalities of the CEO, the CFO and the board. That said, all successful budget presentations do need to make a clear business case for spending and especially for new initiatives, and CIOs had better have support lined up from the business units that should benefit. The presentation itself needs to be concise and free of technical jargon.

Granger-Happ also says to tread carefully without being too clever, recalling the once popular comparison between the relative cost of computers and cars. “You remember that comment that if cars were computers, Rolls-Royces would cost $1,000 and get 100 miles to the gallon?” he says. “It was pretty easy for [someone] to come back and say, But they’d lock your windows every other week and crash without warning.”

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.

Business, Not Technology

First, avoid jargon. Instead, explain technology spending in terms the business side understands.

It takes discipline to avoid slipping into tech-speak. Granger-Happ tries never to get into the technical nitty-gritty during a budget discussion. For instance, when someone asks during a budget presentation how a wireless network will help achieve business goals, he avoids talking about its speed or range. Instead, because Save the Children wants to improve network access for 3,400 of its field workers, many of whom are in remote parts of the world, he talks about helping them connect more readily.

Paul Cavanagh-Downs, CIO at Aristocrat, a gaming concern based in Sydney, Australia, observes that getting technical gets you labeled as disconnected from the business.

“The businesspeople will often try to get into the technology, but it’s not a good thing,” he says. There’s no gain for a CIO to explain the differences between, say, a frame relay network and a multiprotocol label switching network (MPLS). “Even if you’re asked the questions, if you answer, you’ll still get labeled as being too technical,” he says. It’s happened to him, and he has business credentials as an accountant who became CIO after a long stint in finance.

Cavanagh-Downs says his tack for avoiding technical discussions during the budget presentation is to pause, then use his answer to reframe the question: What matters is not the technical difference between frame relay and MPLS, but which one offers the business better flexibility or scalability.

At American Airlines, Ford goes one step further and tables such inquiries. When businesspeople ask technical questions, he directs them to prepared reference slides. Meanwhile, Ford keeps budget sessions focused on the business by having his lieutenants who work most closely with American’s business units participate in each business unit’s budget presentations. That strategy lets Ford’s department heads show off their business expertise and prove that IT’s portion of the payroll is going to good use.

Ford does not rely on charts to illustrate the value of IT. “If I’m not doing my job in the eyes of my counterpart [say, the marketing executive], no function point analysis is going to tell him otherwise,” Ford says. Ford cites his current budget planning, in which one emphasis is faster turnaround on assignments. “We think we’re pretty quick, and we’re faster than last year, but there are a couple of business units that don’t agree with that.” So rather than argue back with charts showing how fast IT gets the job done, Ford’s managers will explain how their plans will improve timeliness even more.

Some CIOs do, however, find that illustrating IT performance sometimes helps them make their case. Kevin Kearns, the former CIO and CFO (and now CEO) at Health Choice Networks in Miami, found budget benchmarks to be an effective tool for quelling unrest amongst the board members. As CIO, Kearns made sure the board of the community health center knew his spending, at about 2.5 percent of revenue, was below the industry average of 3 percent to 4 percent of revenue. The comparison helped him get his basic budget numbers passed.

Don't Forget the Polish

Even though the budget presentation can be a pro forma event, it still has to be good. There aren’t rubber stamps in budget discussions. When all is said and done, Ford says, he expects he’ll be asked to spend slightly less than he’s proposed. Closing the deal in your favor requires a polished performance. Use these tips to shine:

Be succinct. Kearns says that since he’s become a CEO, he realizes how focused presentations need to be. “I have this board, and I have five times the amount of stuff for them than we have time to do.” So Kearns has his CIO give him a detailed presentation about the budget, and then they talk about which things to highlight in the 30 minutes or so allotted to the budget discussion with the board.

Pace yourself. Naomi Deutscher, a presentation coach, encourages executives to speak quickly, but adds that it’s also important to vary your pace. In particular, she recommends pausing after a significant point has been made, or a new topic or slide introduced.

Use slides for emphasis. Deutscher advises that slides contain only a few lines of text—six at the most—and that CIOs use these as talking points rather than reading them off verbatim. Using color or bold text for important points or statements helps get the message across.

Get feedback. Practice giving a budget presentation beforehand, and, if possible, tape yourself. Then, after the presentation, “have a colleague tell you what worked about your content and style, and what didn’t,” says Deutscher. “People don’t do enough to find out what people like and get feedback on what worked and what didn’t.”

But the annual performance is but one point in a continuous exercise. It requires strength in numbers and months of hard work, along with political savvy, corporate tea leaf reading and an understanding of the company’s strategy and IT’s role in it.

Michael Fitzgerald is a freelance writer in Millis, Mass. He can be reached at michael@mffitzgerald.com.

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