FTEs are hiding behind that contract you are about to sign. Contractual obligations (software, maintenance, subscription and the like) and people are your two most expensive line items, but that’s probably not a surprise. But the hard truth is that they are absolutely correlated on a growth chart. Before you sign, make sure you are evaluating each contract honestly with your IT leaders to determine the downstream support needs. And no matter what a vendor claims, “cloud” does not equate to zero IT employee needs in your organization.
Did you know you have an “operational tail”? Every IT investment comes with some type of “operational tail,” which can be either work effort or hard-dollar expense. Even if your IT leader tells you that there isn’t a tail, there is. The best way to get a handle on this year over year is to infuse your current governance process with the right questions about investments that contain IT solutions.
Whatever the format of your business case evaluation process, there is a place to highlight (ideally to finance-based committees) the operating costs to which you are agreeing when you sign that purchase agreement. These project-induced costs should be accepted as part of ongoing IT budgets, and ideally logged (we use a SharePoint list) so they can quickly be identified and excluded when evaluating IT spending year over year. Remember … it was already approved, even if it was not quite budget season yet.
Lastly, consider creating a cost center to track your annual nonbudgeted spending. Sometimes those are one-time dollars, but they can also be annual commitments. When they are buried in a cost center with other IT spending, it can become easy to lose them when the dollars are aggregated. A cost center for only nonbudgeted spending keeps this front and center all year long as financials are reviewed, and it also helps in identifying new spending for next year’s budget.
Don’t expect every dollar to have a metric. It is perfectly acceptable to expect IT leaders to be metric-driven in budget defenses. The key is to acknowledge that not all IT spending is created equal in the Land of Benchmark. Staffing ratios for support areas like the service desk and desktop support are very cut and dried, and relatively consistent across benchmark data sources (so many calls require so many agents, for example). Deviation from these norms should mainly reflect tolerance (or desire) for lower (or higher) service levels.
Areas such as application support, development and the like are more difficult to quantify from the perspective of how many of FTEs are needed to achieve an expected output. Instead, this may be assessed qualitatively, for example, by asking if the current service level is acceptable, and if not, does it need to go up or down. Expecting every IT dollar to have a supporting and meaningful metric may lead to unnecessary frustration.
Most of this may seem academic, but the simplest advice I can offer is this: Make IT budgeting more of a year-round exercise that is focused on building next year’s budget, one careful decision at a time.
Joey Sudomir is vice president of information technology at Texas Health Resources.