With technology budgets expected to shrink in 2021, IT organizations must adapt their budget proposals.
IT budgeting is a tough job under the best of circumstances, but it is especially challenging this year because of the coronavirus pandemic and the shutdown measures required to contain it. The resulting global economic crisis is causing organizations across all industries to rethink how they will spend their tech dollars in 2021.
In its Global Economic Outlook published in June, The World Bank projected the global economy will shrink by 5.2 percent in 2020 — the biggest contraction in eight decades. Although most business leaders understand they must continue to invest in technology, economic uncertainty is forcing them to shift their priorities and adapt their budgets accordingly.
For the past several years, a sizeable chunk of IT spending has gone toward security, cloud services and replacing aging IT infrastructure. While those will remain important considerations, remote work and digital transformation initiatives will command a larger share of tighter IT budgets in 2021.
Doing More with Less
Almost two-thirds of business leaders responding to a recent TechRepublic survey said that COVID-19 will force them to tighten their 2021 IT budgets and change their spending priorities. More than a quarter said they will spend more on remote technologies that enable employees to work from home and 22 percent plan to spend more on security. To offset spending in those areas, 17 percent plan to postpone major projects.
Pressed into a “more with less” mode, organizations will likely pause deployments of new technologies, postpone hardware replacements and delay software upgrades. However, organizations must avoid the trap of making drastic, random cuts across the board just to try to hit an arbitrary number. Budget conversations must recognize that technology improvements are key to both short- and long-term business survival.
“During the rush to remote work caused by the pandemic, it quickly became clear that technology is the glue that keeps businesses and employees connected,” said Peter Tsai, senior technology analyst at Spiceworks Ziff Davis. “With more people working remotely than ever before and face-to-face meetings out of the question, organizations wouldn’t have been able to maintain business continuity or keep productivity levels high without the many technologies companies rely on … including laptops, video conferencing, VPN, chat apps, Internet connectivity and more.”
Key Considerations for 2021
To ensure a meaningful discussion that addresses the value IT delivers to the organization, it is important to create a budget that makes it easy for the management team to understand how IT expenditures not only support immediate business needs but will also drive enhancements and innovations for building new business models. Here are some suggestions for organizing an IT budget presentation for 2021:
Be Realistic. The budget process shouldn’t be an attempt to grab as much cash as possible for the IT department. IT leaders must understand the current economic realities and work with management to achieve budget cuts where possible. Work with stakeholders in every department to ensure budget requests support an overall IT strategy designed to help the company be more efficient and competitive.
Show Them the Money. Categorize expenses so management can see where and how IT dollars are being spent. At a basic level, IT costs should be broken down by staffing, hardware, software, cloud and support costs. For a more detailed view, track costs for energy and utilities, IT real estate, voice and data carrier fees and vendor costs. Don’t forget to include licenses, taxes and any other associated expenses.
Aim for the Cloud. Given the rapidly changing nature of technology, it often makes more sense to acquire IT resources for a monthly fee (OpEx) than to purchase them outright (CapEx). This not only creates budget flexibility but provides a hedge against the risk of IT purchases that prove to be inadequate or ineffective. Technology-as-a-service solutions and traditional equipment leasing models are also effective ways to shift to a pay-as-you-go approach.
Protect Priorities. With some cuts likely, it is critical to ensure that high-priority items are adequately funded. In 2021, remote work will be at the top of the list. Budget proposals should include funding for VPNs and other remote access technologies, team collaboration solutions, and remote monitoring software. Larger organizations may want to purchase, configure and image laptops for remote employees.
Don’t Skimp on Security. The business and financial consequences of data breaches and malware attacks can be devastating. Take the time to lay out what entry points a hacker might exploit and focus security investments accordingly. Remote workers are a particularly inviting target, so budget for endpoint security and multifactor authentication.
The global pandemic has disrupted businesses worldwide, and slowing revenues are forcing organizations across all industries to tighten their belts. However, businesses must continue to invest in technology to support and secure a remote workforce. As a result, IT budget proposals for 2021 should provide a holistic view of how IT drives business benefits instead of focusing on individual line-item requests.