IT budgeting and spending strategies guide for CIOs

IT budgeting and spending is a balancing act between needs and wants even in a strong economy. Are you ready to figure out what your IT department will need? Check out this CIO Briefing for IT budgeting and spending strategies.

Budget season is always a stressful time for CIOs, who are expected to accurately forecast IT spending and budgeting needs for the coming year. How much should you spend on IT maintenance vs. innovation? What are the hot new technologies for which you need to allot additional spending? Get advice on IT budget and spending strategies in this CIO Briefing.

This guide is part of's CIO Briefing series, which is designed to give IT leaders strategic guidance and advice that addresses the management and decision-making aspects of timely topics. For a complete list of topics covered to date visit the CIO Briefing section.

Technology spending 2008

When it comes to technology spending and creating an IT budget, a quick look at the economy is often enough to get a rough idea of whether budgets are expanding, contracting or staying flat -- and this year is no exception.

"Looking back over the last 60 years, what's happening with economic growth feeds directly into what companies are prepared to spend on technology," said Andrew Bartels, a research analyst at Forrester Research Inc. in Cambridge, Mass. "We see some positive signs that the econpomy seems to be reviving a little, keeping us in fairly moderate growth."

Bartels forecasts technology spending in 2008 at about a 7% increase, which is slightly higher than 2007. "It's a bit of a slow ramp up, but the worst is behind us, and as that happens, it should increase confidence and IT investments," he said.

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Budgeting for IT: Four pitfalls to avoid

The CIO serves many masters, so it's little wonder that creating an IT budget has many pitfalls. Here are four common pitfalls to avoid during this 2008 budget season.

Pitfall No. 1: Not understanding the company's strategic goals.

CIOs, having reached a certain level in their companies, know how to budget within their own departments. The trick is working at a higher level, which may or may not be facilitated by your organization's structure. Even if you are not involved in corporate goal-setting, you have to make it your job to understand those goals. What are the key initiatives for the coming fiscal year? How will corporate goals be met short term and long term? What role does IT play in the process?

CIOs fail to show value in training, lose budgets

Your training budget is low-hanging fruit when it's time to trim costs. But experts say that if businesses made a more consistent and solid business case for training, holding onto that money would be a lot easier.

The best way to make a business case for training is to offer metrics on the value it provides to the organization. But, unfortunately, most IT organizations lack a comprehensive approach to measuring such value, according to Andrew Walker, a research director with Gartner Executive Programs, a division of Stamford, Conn.-based Gartner Inc.

"Very rarely do they look at whether they are getting value from these training programs," Walker said. "You can tell training is not valued if it keeps getting cut. It's the first point of cuts for most finance people because no one is able to do a good business case to keep it in there. That sends a message to people that you don't value training."

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SOX spending is down, but CIOs still have work to do

Businesses spent less on Sarbanes-Oxley Act (SOX) compliance in 2006, but the 2002 corporate reform legislation continued to extract its pound of flesh from public companies. A study from Foley & Lardner LLP shows that while the total cost of SOX compliance dipped in 2006, spending on so-called out-of-pocket costs rose by double-digit percentages.

More resources

Resource center: IT spending and budgeting

Resource center: IT spending and budgeting for the midmarket

According to the Chicago-based law firm's study, public companies with more than $1 billion in annual revenue spent an average $10 million on costs such as board compensation and audit and legal fees in 2006. That's a 12% increase over spending in 2005. At public companies with revenue under $1 billion, the increase was 13%.

External audit fees claimed the biggest chunk of money, accounting for more than 47% of the out-of-pocket spending on compliance by the smaller public companies. At companies with more than $1 billion in revenue, a whopping 60% of the money goes to external audit fees.

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