IT Manager's Handbook: Getting Your New Job Done (40 page)

www.openoffice.org
. [Open Source productivity software].

www.oracle.com
. [ERP vendor].

www.rackspace.com
. [cloud service provider].

www.radicati.com/wp/wp-content/uploads/2011/05/Email-Statistics-Report-2011-2015-Executive-Summary.pdf
. [e-mail usage study].

www.salesforce.com
. [cloud service provider].

www.sap.com
. [ERP software vendor].

www.siia.net
. [trade organization for software publishers].

www.ssaglobal.com
. [ERP software vendor].

www.symantec.com
. [antivirus software and deployment tool vendor].

www.trendmicro.com
. [antivirus software vendor].

www.tumbleweed.com
. [e-mail management vendor].

Books and Articles

Babcock C, (2010).
Management Strategies for the Cloud Revolution: How Cloud Computing Is Transforming Business and Why You Can't Afford to Be Left Behind
. McGraw-Hill.

Bradford M, (2008).
Modern ERP: Select, Implement & Use Today's Advanced Business Systems
. Lulu.com.

Brousell L, (2011). Putting the Cloud First.
CIO Magazine
. [June 15].

Carter J, (2008).
Unified Communications 100 Success Secrets Discover the Best Way to Unify Your Enterprise, Covers Unified Messaging, Systems, Solutions, Software and Services
. Emereo Pty Ltd.

Currier G, (2011). Speeding the Cloud.
Baseline Magazine
. [May/June].

Flynn N, (2009).
The e-Policy Handbook: Rules and Best Practices to Safely Manage Your Company's E-Mail, Blogs, Social Networking, and Other Electronic Communication Tools
. Amacom.

Haletky EL, (2008).
VMware ESX Server in the Enterprise: Planning and Securing Virtualization Servers
. Prentice Hall.

Hugos MH, Hulitzky D, (2010).
Business in the Cloud: What Every Business Needs to Know about Cloud Computing
. Wiley.

McHoes A, Flynn IM, (2010).
Understanding Operating Systems
. Course Technology.

Meeker HJ, (2008).
The Open Source Alternative: Understanding Risks and Leveraging Opportunities
. Wiley.

Mitchell RL, (2011). Big Business Takes a Small Bite of the Apple.
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. [August 22].

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. Emereo Pty Ltd.

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. Recursive Press.

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Sosinsky B, (2011).
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. Wiley.

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Chapter 6

Managing the Money

Budget: A mathematical confirmation of your suspicions.

A.A. Latimer

Chapter table of contents

6.1
The Budgeting Process

6.2
The Difference between Capital Expenditures and Operating Expense Items

6.3
Lease versus Buy: Which One Is Better?

6.4
Other Budgeting Factors to Consider

6.5
Managing Vendors

6.6
Managing the Money during Difficult Times

6.7
Outsourcing and Offshoring

6.8
Further References

As a manager, one of the things you have to manage is money and how your department spends it. Also, because IT departments often have one of the largest budgets in the organization, many eyes will be on your budget. This chapter will help you minimize, and deal with, the raised eyebrows over all those eyes. In the pages that follow, we discuss the issues behind a variety of topics, such as how and when a budget is generated, capital versus operating expenses, leasing versus buying, key factors you need to watch out for when developing your department's budget, managing the relationships with your vendors, outsourcing, and managing the money in difficult economic times.

6.1 The Budgeting Process

The budgeting process assigns specific amounts of money to specific departments within a company for a single period of time called a “fiscal year.” Sometimes a company's fiscal year is not the January–December calendar year. The year that the budget tracks can be any 12-month period, although it generally begins on January 1, April 1, July 1, or October 1 (the beginning of a quarter).

Regardless, the 12-month period for your budget is called the “fiscal year.” If the fiscal year isn't the same as the calendar year, you identify the fiscal years by the year in which it ends. For example, if your fiscal years go from July 1 to June 30, you would refer to the budget that covers July 1, 2013, through June 30, 2014, as the 2014 budget, or sometimes as “fiscal 2014.”

In general, the budgeting process begins two to three months before the start of the fiscal year. At this point, you begin to develop your first draft of the budget, estimating the amount of money you plan to spend during the upcoming 12 months. You prepare this budget based on the past year's spending as well as factoring in future plans and expectations such as growth, consolidation, new initiatives and projects, etc.

In your planning, you should have discussions with other department managers to learn about their upcoming needs and projects that might impact your department's spending. Depending on your company and the business that it is in, you may also want to include discussions with key partners, clients, suppliers, and customers. Similarly, it would be wise to take a look at your company's chief competitors to try to learn about their use and plans for IT to help gauge your own plans.

If you are new to management, you will quickly discover that the budget process and all its associated processes are critical to you and your department's success. Regardless of how important your role in the company is deemed to be, unless that importance is backed up with financial support specified in the budget process, you will find getting anything done to be a very difficult task.

Possible Budget Items

The first place to get started with a budget is to review the previous years' budgets for your department. Budgets are historical records and are (in most cases) carefully tracked—somebody in your company is always watching the money.

Every company keeps track of budgets and spending a bit differently and may use different names, categories, and groupings from the ones given here. Find out how your company budgets and then customize the concepts and techniques described here to meet your needs.

Which Items to Track

The following is a list of potential items for your department's budget. Check each item to see if you are tracking it in your department and if not, why not.

Personnel

•
Staff compensation (salaries, overtime, bonuses, etc.)

•
Benefits

•
Recruiting (agencies, ads, etc.)

•
Bonuses/overtime

•
Education/training

•
Consultants/temporary help

Hardware

•
Upgrades

•
Maintenance and support

•
New equipment

•
Leases/rentals

•
Replacement components

Software

•
New software (applications, operating system, utilities, etc.)

•
Vendor maintenance and support

•
Upgrades

•
License renewals

Telecommunication Services

•
Service fees for handheld devices, cell phones, and tablets

•
Telco lines (point-to-point, MPLS, voice-trunks, ISDN, etc.)

•
ISP connections and services

Supplies

•
Printer consumables (paper, toner)

•
Backup tapes

•
Miscellaneous hardware items (keyboards, mice, flash-drives, cables, etc.)

•
Basic office supplies

Travel and Entertainment

•
Conferences

•
Off-site travel to branch offices and new sites

•
Lunches and dinners for staff working late or through the weekend

Miscellaneous

•
Books and subscriptions

•
Membership dues for professional organizations

•
Postage

•
Duplication

Depreciation

•
Hardware

•
Software

Physical Plant

•
Data center services (cabinets, raised-floor, HVAC, electrical)

•
Cabling (fiber and copper)

•
Furniture

Outside Services

•
Disaster recovery

•
Off-site tape storage

•
Service bureaus

•
Consultants

•
Service providers (Web hosting, application providers, services in the cloud, etc.)

Overhead

•
Rent

•
Utilities

Chargebacks—Who Really Pays?

In some companies, the budget for IT is used for all technology costs. In other cases, each department must budget for the technology it buys, such as computers and printers, as well as for specific projects and applications. Sometimes IT's budget for items used across all departments (IT staff, servers, Internet connections) is prorated and charged back to each department. These are commonly called “chargebacks.”

The benefit of charging expenses back to individual departments is that those departments become more cost conscious of their IT uses and requirements. They better understand the costs of making everyone's e-mail accessible on their cell phones, for example, if they have to pay for that functionality. The downside is that it can create a tremendous amount of administrative overhead to calculate the chargebacks and process them. It can also create additional headaches for you if department heads think the chargebacks are too high. “I saw an ad in the paper for a $500 PC, but the ones we're buying are $800—my team doesn't need a brand name or fancy configurations, so we'll take the $500 one,” for example. It can also create IT challenges if some department heads are very cost conscious about their spending on IT, while other department heads are less concerned. Situations like this mean that there can be distinct technology differences/capabilities from one department to another.