The IT team supporting a growing business often faces a thankless task. As technology becomes an increasingly important part of every organisation, they must be able to provide the IT support and services necessary to keep the business running on a daily basis, while also looking towards the innovations and upgrades that will help to future-proof the business and keep it competitive. Yet as tech needs increase, they also have to justify an increase (or even continuation) of the spend on IT investment to stakeholders who find it difficult to understand just where all that money is going, and why. These people want solid numbers when it comes to the ROI of IT, so here is how to go about giving them what they want in order to maintain or increase the IT budget your business needs.
Effective IT support should bring about greater efficiency that reduces unnecessary costs and improves the processes the business needs to operate, but many a CFO will look at getting rid of costly tech investments as the easiest way to reduce the company spend, rather than budgeting for the upgrades that will not only streamline operations but also improve ROI. However, there are ways to ensure the CTO and CFO are singing from the same hymn sheet when it comes to IT investment.
What We Have We Hold
The first thing your IT team needs to do is justify existing spend, and this requires understanding exactly what hardware and software assets the business currently has in its IT infrastructure, in order to pinpoint what is crucial to business productivity. These are the IT assets you have and need to hold on to, so it is worth outlining the financial repercussions of their removal.
However, fair compromise should also be part of the process, so the CTO should be able to identify unnecessary expenditure, and include recommendations to reduce these costs or transfer them elsewhere. For example, if several computers sit idle every day because the company has adopted a remote working policy, resources could be shifted from maintenance of those machines to upgrading the mobile devices being used by staff.
The CTO should then outline what upgrades or investments the business needs as part of its IT roadmap, in order to remain competitive under increasing tech demands, and to meet future needs. The reasons for investment could be enforced, such as with GDPR, or advisable, such as with increased capacity, implementing new capabilities, or simply becoming more efficient. Either way, you need to be able to outline why you need a bigger IT budget, and how it will help the business grow.
It’s important to outline all of this in a language that stakeholders can understand, which is why it is advisable to work with an outsourced IT consulting service who can put together an unbiased and comprehensive audit of your IT infrastructure, and offer an approachable consultation process that clearly shows:
- That all IT assets are included
- All IT assets have been reviewed for optimal performance
- What resources are needed to support what the business has now, and to handle any planned upgrades in the future
The CTO needs to be able to outline to stakeholders where any of the critical components of the organisation’s processes or activities (eg, software, services, infrastructure) are not being supported by investment in proportion to the benefits they bring, highlighting where the IT budget is simply keeping things running rather than fuelling the company’s aims.
Justifying Further Investment
Once you have stakeholder backing to continue with the IT support you currently provide, you need to outline why further investment is necessary, and how it can produce a better ROI.
The financial benefits of IT upgrades or embarking on a new IT project can fall into several categories:
- Enabling the business to offer a new product or service to increase revenue
- Increased efficiency due to better software or hardware
- Reducing costs, such as with adopting VoIP to replace phone networks, or hiring an outsourced IT service team to act as a virtual CTO
- Reducing capital expenses, such as storage and server capacity by moving to the cloud
Simply put, calculating the ROI of any such IT investment project means taking the expected returns or gains and subtracting the cost, then dividing that figure by the cost to give a percentage. However, getting an accurate figure for those expected returns is not so simple, because you can only include measurable returns. It’s difficult to put a value figure on improved customer support or usability, but it is important to try to do so in order to show how they can increase efficiency, and more importantly, revenue.
The best way to present this ROI calculation is to have all stakeholders first agree on what they consider to be expected returns, and what should be included in this calculation, and that means having a formal agreement on what represents value.
Because it can be difficult to calculate an increase in returns as a result of enhancements in customer support, etc, it can be advisable to run a pilot to see of the figures are close to your estimations. For example, if a three-month trial period of a new payment option supported by IT results in an increase in sales, you can justifiably argue that this will continue over a longer time period and is thus worth investing in, if the cost is not prohibitive.
That brings us back to cost. It, too, is difficult to calculate, but it is best to be open and upfront about it. This doesn’t just mean the initial costs involved in implementing an IT upgrade, recruiting more staff or hiring an outsourced IT specialist. You may also need to factor in depreciation of IT assets involved in the project, staff training, and possible downtime, so the timeline of implementation is important, because you need to outline when returns will start to outweigh spend over the course of the entire upgrade.
It is also important to underline the fact that the cheapest upgrade option is not always the best choice, and explain why. Investing in new devices, for example, will cost more up front than sprucing up existing ones, but they will have a longer lifespan and will require less maintenance over time, so can save the company money in the long run.
Ensuring the board understands that while there are costs involved, IT is an investment, not an expense, is key to securing the budget you need. If this is outlined properly, the initial resources needed to improve the efficiency of the business will soon be outweighed by the benefits they bring, giving an ROI that will keep everybody happy.
As an expert IT consulting service, the team at Optimity can work with you to ensure you can prove the ROI of IT investment to your business. Get in touch to arrange a consultation, and get started by booking an audit with us.