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How to develop a network budget
A network budget is an important part of IT financial planning. Organizations can follow one of several different approaches to create a network budget based on business goals.
Networking connects all internal and external IT systems and resources, making it an essential component of an IT department. When organizations ensure network resources operate as expected, it contributes to overall business results.
A network budget identifies the amount of money an organization needs to spend on its IT networks and networking services. It is an important component of IT financial planning, as it establishes the relationship between network budgeting and larger business objectives.
CIOs are typically responsible for IT budgets. However, CIOs might assign the preparation, administration and maintenance to a senior-level IT leader, such as a CTO or chief networking officer.
A network budget should address short-, medium- and long-term networking requirements. These include salaries for network team members and expenses related to enterprise network planning, design, deployment, testing and maintenance.
Network budgeting approaches
Because networking affects the entire organization, budget development is an essential task. The network team gathers financial data relating to network services, such as Capex, recurring Opex and network maintenance. Prior budget data simplifies the overall budget process, as it presents useful historical data for analysis.
After gathering data, the network budget team analyzes current needs and long-term requirements based on business data and previous budgets. Next, the team should obtain input from business unit leaders on the networking resources they expect to need. This can range from the number of employees connecting to IT resources -- on-site or remote -- to the number of customers connecting to company services, through the firm's website or contact center.
From there, network leadership must project what networking requirements they need and when they need them. Then, they must identify the cost to deliver the necessary bandwidth and connectivity.
Depending on the network infrastructure's size and complexity, budget preparation might range from a few days to weeks. Once prepared, senior leadership must approve the budget. If leadership rejects the proposed budget, the network team might need to restart the process.
Network teams can take several different approaches to creating the network budget.
1. Baseline approach
A baseline approach is the most traditional approach to network budgeting. Set a baseline using the previous year's network costs and adjust the figures for inflation and potential changes.
2. Zero-based approach
A zero-based approach examines every dollar spent on the network. Justify every expenditure from the budget starting point, with no carry-over issues. The process reduces or eliminates waste and aligns with actual business cases versus historical experience.
3. Goal-oriented approach
A goal-oriented approach links spending to business goals. It helps justify investment to management by linking proposed expenses to specific business activities and projects designed to address KPIs and other metrics.
4. Rolling forecast approach
A rolling forecast approach adapts to dynamic business environments by having more frequent budget reviews. Whether monthly or quarterly, it results in more flexible budgeting to accommodate new networking developments, business changes or operational threats.
5. Total cost of ownership approach
The TCO process examines all relevant costs, such as planning, deployment, testing, maintenance and training. This approach is most often ideal for large-scale complex network projects. It's also good for changes in networking technology -- such as moving to a software-defined WAN -- and it carefully examines both Capex and Opex costs.
6. Risk-based approach
A risk-based approach links investments to risks the organization might face and focuses on budget items that can lower the likelihood of risk events, such as cyberattacks, loss of productivity and compliance failures. Finance and healthcare organizations often use this approach.
How to select the right approach
Teams must decide the most appropriate network budget approach based on specific business criteria.
| Business priority |
Recommended approach |
Business case |
| Stable and mature |
Baseline or TCO |
Ideal for organizations that want a predictable, comprehensive budget plan |
| Dynamic and actively changing |
Rolling forecast or goal-oriented |
Optimal for organizations without a fixed budget plan |
| In start-up mode |
Zero-based |
Useful to help organizations with limited resources estimate budget costs |
| Focused on revenue growth |
Goal-oriented |
Optimal for organizations that want to plan a budget that aligns with business objectives |
| Required to demonstrate compliance |
Risk-based |
Enables organizations to direct resources to high-risk areas of compliance |
| Focused on preventing cyberattacks |
Risk-based |
Enables organizations to direct resources to prevent malicious threats |
| Using fixed budgets |
Baseline or TCO |
Ideal for organizations to allocate a set amount of funds through a predictable budget plan |
| Using dynamic budgets |
Rolling forecast |
Enables organizations to create a flexible budget plan that adapts to changes |
Plan a network budget
Begin network budgeting by creating a document that outlines how many resources the organization plans to allocate to various aspects of the network. IT leaders can track this with a table that includes each consideration and columns that indicate the month in which the team spent the portion of the budget.
Click to download a free
network budget template.
Evaluate current and future network needs
As organizations look ahead at ways a network budget can pave the way for future business requirements, they must consider several criteria. Examples of factors organizations should evaluate include the following:
- Current network capabilities that can adapt to future requirements.
- Current bandwidth use, latency and uptime.
- Network asset inventory by device lifecycle, license fees, warranties and maintenance.
- Network performance monitoring tools.
- Network capabilities against current and strategic business plans.
- Current and future use of advanced technologies such as AI and IoT.
- Potential changes to the business from a merger or acquisition.
- Changes in work performance, such as remote working.
- Network topology adaptability.
- Network performance.
- Network security, such as firewalls or intrusion detection and prevention.
- Network resilience and recoverability.
- Essential capabilities versus advanced, nice-to-have resources.
Align network investments with business goals
Organizations can follow several steps to ensure their network budgets support broader business goals and maintain technological competitiveness. Networks are essential to enabling technology and should not be overlooked.
Step 1. Understand the corporate strategic requirements
Identify key business priorities and examine how networking supports those priorities. Examine issues such as market growth and expansion, digital transformation, improving customer experience and ways to optimize or reduce costs. Network services play a key role in each of these issues.
Step 2. Identify and understand business use cases
This step links networking with specific business activities and identifies how networking helps achieve the stated goals, including changes to current remote work activities, deploying a new CRM system or updating a contact center. Compliance requirements might also factor into this.
Step 3. Focus on how networking affects ROI
Properly engineered network services help avoid unnecessary costs, downtime and network security breaches. Scalable network services are essential to ensure an uninterrupted flow of business activities.
Step 4. Risk management
Organizations face many threats -- both internal and external. Threats typically occur over the company's network infrastructure. Preventing network perimeter porosity is a key networking strategy to reduce the likelihood of cyberattacks.
Step 5. Partner with business units
The network team must engage with business units proactively to understand their current and long-term requirements. This enables them to ensure network resources are in place when needed.
Step 6. Build a networking roadmap with key goals
Once teams address the prior steps, they should have sufficient knowledge of the business to prepare the network for future business activities. From this vision, teams can create a roadmap of specific initiatives and identify budget requirements.
Link network planning and design activities to metrics such as KPIs. Translate these onto the roadmap as specific activities by month, quarter or year.
Paul Kirvan, FBCI, CISA, is an independent consultant and technical writer with more than 35 years of experience in business continuity, disaster recovery, resilience, cybersecurity, GRC, telecom and technical writing.
