Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
2004 Budget

Monday, November 24, 2003  

"What do I spend all this money on?"

Last year, the META Group ( put out a global benchmark for IT budgets, showing that financial services companies could measure themselves against three key metrics and the industry average:

1. IT budget as a percentage of revenue -- 6.3%.
2. Technology support per employee (aka number of IT employees to total employees) -- 7.3%.
3. IT spending per employee -- $16,039.

My proposed budget will bust #1 & #3 by about 35% and be within 10% of #2. Why? What kind of irresponsible, profligate budget could I possibly be proposing? Let's break it down with each major category and percentage of total budget. In addition, I'll compare my budget precentages alongside those found in research done by Computer Economics ( in 2002. The benchmark will be in square brackets.

Personnel -- 23% [36%].
Looks like I'm either severely understaffed or really, really efficient. I'm not sure if that makes me lucky or good. I suspect it's because we prefer to invest in technology to keep the personnel costs down, especially help-desk related functions.

Training -- 1% [3%].
OK, so training in my budget looks like a rounding error. Still, it's better than a big whopping 0%. I believe in reinvesting in my staff through very targeted, immediately applicable training. I think most certification is a waste of time and I think the rest of the IT and business world is waking up to that fact. I suspect the higher training figure given by the benchmark still reflects the certification craze.

Imaging -- 7% [N/A].
We outsourced both our document scanning and presentment this year. We transfered costs that were primarily in another department for the scanning and put the allocation into my budget. Still, it's a pretty hefty charge that we'll be watching over the next couple of years to see if something can be done to reduce the ongoing cost.

Telecommunications -- 15% [8%].
Data circuits, local & long distance, toll-free services, home cable modem/DSL access. This budget item has been reigned in over the past year due to very aggressive vendor pricing but remains a tremendous slice of the budget. We're continuing to push for DSL connections to small branch offices connected to the main office via site-to-site VPN's in order to reduce this expense category.

Hardware and Software (Purchase & Maintenance) -- 40% [42%]
We're right on target as a percentage of budget with this category. My ongoing concern is paying for maintenance. Several of our vendors decided that this year was going to see some cost increases. I've decided that 2004 is the Year of the Pushback -- we're either dropping maintenance on non-critical systems or getting some better pricing.

Miscellaneous -- 15% [N/A]
The other 15% is dedicated towards items that mostly have no business in an IT budget. Copiers, faxes, Pitney Bowes mail sorting machines and anything else with electricity that people could think of. Depreciation for items that my department has never seen. That sort of thing.

That's how the main budget items break down. Now I've got to work on reconciling how much I say I'll spend vs. what the accounting department projects I'll spend. Once that's done -- reconcile it all with Plan B, which is looking likely this year. Ugh.

posted by Henry Jenkins | 11/24/2003 03:53:00 PM

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