Tips for Stretching IT Budgets
In today’s multifaceted business environment, technological needs are constantly changing. In fact, now days IT has became a critical initiative for success. With the widespread use of IT, organizations face the challenge of increasing competition, expanding markets, and rising customer expectations. This increases the pressure on organizations to implement various financial budgeting strategies that could potentially lower the cost. Therefore, a concept that recently has gain momentum, and is becoming a popular practice in most organizations is IT budgeting. According to Baker (2009) the six strategies that are effective in controlling IT budgets are: repurposing the already implemented software, efficiently
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In other words, which means to expand the use of the same software towards different functionalities, for instance utilizing the Numara FoorPrints software from IT services to HR department (Baker, 2009).
For an effective IT budgeting, IT leaders need to execute viable decision-making ideas that can result into monetary savings in the long run (Heier et al., 2008). Similarly, repurposing of the software positively effects the organization, by saving an amount that would have been spent on a new software purchase, and creating some extra budget that could be invested towards other strategic investments or initiatives (Heier et al., 2008). In terms of the operations cost, even though the repurpose might slightly increase its maintenance cost if the software has already been used for many years, but still by evaluating the whole operational budget for two different functions it still is a cost effective-strategy (Heier et al., 2008). Additionally, it serves as a valuable asset to the organization, in terms of saving both time and money of their IT staff, as they no longer are learning totally new software.
On the downside, there might be certain hidden operational costs involved that might require more maintenance, for instance the software can have limited memory or processing capacity, so in such a case it might actually cost more to repurposing the same software (Heier et al., 2008).
Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.
Develop a financial plan to feasibly meet our budget constraints (KMAONE, 2013). In order to maintain an in-house
The limited and inflexible budget is also a weakness for the organization in terms of acquiring and investing in new systems. (Laan, 2013).This is because the systems are quite costly and the organization requires an increase of the performance of all its servers as well as addition of new equipment and with the limited budget and insufficient funds allocated to the equipments, it might not be easy to accomplish that.
This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).
The challenge is some of the past development work was done by a consultant. We have option to scale the current work which is not an industry standard and end up paying more money and band aids fixes or develop a new program that we can design and manage for our future growth knowing future growth is inevitable. The risk of continuing the current information system program is low for now, but it will be a major replacement issue for the future growth that could cost the company millions and lost business opportunities. Developing a new information system program is a risky choice from time
Like many of its most profitable competitors, Alcan has grown quickly through insightful series of mergers, acquisitions and rapid product development and launch strategies throughout the major markets it sells into. The company has settled on a highly decentralized divisional business model that has to the point of the case study served them well. Their IT systems are showing signs of massive overduplication of expense, with a $500M level of spending on enterprise applications with SAP being the majority. There are further signs of massive waste in their highly diversified organizational structure. There are 400 systems in the company all dedicated to pricing, a massive duplication of costs, time and effort on the part of IT across the five divisions. There are also over 1,000 concurrent enterprise-class IT systems being used throughout the company at any point in time. Conservatively speaking the company is spending 20% of their total enterprise software spend on maintenance costs alone. This is forcing the CIO, Robert Ouelette, to re-evaluate both the organizational structure and IT systems supporting it. The goals of this analysis are to evaluate the advantages and disadvantages of the existing application or IT management structure. An analysis of the proposal by Robert Ouelette is also provided along with an assessment of it potential effectiveness in solving the challenges is facing today.
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
The central challenge that budget developers encounter is predicting what the future holds for the internal business and external factors. Reading the future is something that can never be done with perfect precision. The fast pace of technological change, the complexities of global competition and world events make developing effective budgets both more difficult and more important.
Most entities and organization create budgets as a guide for controlling its spending, prediction of profit, and it expenditure as they progress toward a set goal. Budget involves pulling resources together to achieve a specific goal. According to Gapenski (2006), budgeting is an offshoot in a planning process. A basic managerial accounting tool use in holding planning and control functions together is referred to as set of budgets (p. 255). One major setback manager or budget developer encounter is trying to design a future, a process that cannot be created with the precision just right. This article highlights some financial management
Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.
Reordering the economics of software, cloud computing is alleviating many of the capital expenses (CAPEX), inflexibility of previous-generation software platforms, and inability of on-premise applications to be customized on an ongoing basis to evolving customer needs. These are the three top factors of many that are driving the adoption of cloud computing technologies in enterprises today. Implicit in the entire series of critical success factors that are forcing the migration of on-premise to cloud computing platforms is the greater agility and speed the latter platform offers. Line-of-business executives today are increasingly defining the priorities of IT departments, often also defining budgeting cycles as well. Their primary concern is ability able to quickly get up and running on a new enterprise application, integrating its workflows into existing legacy and 3rd party systems, databases and applications, while also getting the performance gains of the new software (Bentley, 2008). Due to these factors cloud computing is evolving rapidly, changing the economics of enterprise software especially. Large-scale systems are most often purchased using Capital Expense (CAPEX) budgeting processes that often take several months ot over a year to complete. Often CAPEX-based spending on enterprise software also requires the board of directors for a company to authorize spending large amounts on new
In today’s business world the software that a business uses and develops to control their data and manage their business is a critical dimension for the company’s success. While some companies might still believe that IT and software are tangential and purchase their software off the shelf this is becoming less and less of a viable option for companies looking to compete in larger markets. Some companies purchase their software off the shelf, but most companies are seeing the need for customized software whether developed in house or custom ordered. In fact, eighty-seven percent of recently surveyed companies as reported by Joe McKendrick for Service Oriented on ZDNet, said that “building their own software was essential to innovation”. This is a trend that only seems to be growing as business grow more specialized and data becomes more and more critical for making essential business decisions. Each year a company’s software does more and more for the business, whether their software is point of sales, database tracking systems, mapping software or order managements systems, just to name a few. Every management team needs to consider their abilities to develop, modify and create the new software that powers their business moving forward. USM currently struggles with the speed and efficiency that software is developed, and this is hindering our ability to compete in a difficult environment. Examining both new and old methods of developing software and comparing them
The classical software development process does not support reuse.[2] Reusable assets should be designed and built in a clearly defined, open way, with concise interface specifications, understandable documentation, and an eye towards future use. Typically, customer, client, and contract projects are built as "one-time only," without reuse in mind, and tend to be tightly bound within themselves, without the more robust open interfaces which ease the reuse process. Therefore, in order to make the most of software reuse, the software development process must evolve to include reuse activities.
Information Technology (IT) budgeting has become a constant struggle for companies, both big and small. The speed at which technology becomes obsolete, management’s expectations for quick deployment of new technology, and a supplier’s change of their operating model to focus on “as-a-service” (Feldman, 2015) recurring revenue, greatly affect how IT departments approach their budget these days. Other factors such as; lack of company vision or one’s inability to see how their IT department fits into the corporation’s goals and expectations are all huge pitfalls for the IT manager. The inability for IT and finance divisions to
Under a Traditional Budgeting approach, incremental budgeting method is relatively simple, it is based on past levels without improvement. Because they do not add analysis and retain the original cost as last period, so it may cause an unnecessary expenditure. The deficiency of incremental budget has been improved to some extent by fixed budget. A fixed budget is a financial plan that remains unchanging, irrespective of the levels of activity (Wouters, Selto, and Hilton, 2012). The Administrator provides fixed targets and allocates them to the suitable organization unit or individual in an independent mode. Fixed Budget is suitable for the business where there are less opportunities of fluctuations in the existing conditions or if the business is not affected by the change in the external elements and the prediction can be achieved easily to present close outcome (Glautier, 2001). It also works as a scale to manage costs. But unexpected changes in the economy, the frequently changing market environment and new competitor entering can result in significant differences between plan and actual, therefore fixed budget is too rigid in the dynamic environment and capital market.