How Do IT Budgets Really Work: The Suite Spot

The State of the CIO Survey reports that the majority of CIOs are involved in purchasing decisions about IT spend at some level, whether or not they control it directly. However, when a partnership is formed between the leader and IT teams, CIOs are significantly more likely to be involved with approving the solution purchase (71%) and making the final vendor selection (64%) than in companies where IT is viewed as a cost center or service provider.

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Removing the fog of acronym war and delivering the value commentary needed to make complex technologies work for businesses, The Suite Spot is a fireside chat with IT leaders about all topics IT and OT, striving to bring clarity to the business value of traditional tech topics. On this segment of The Suite Spot, hosts Carlos Vargas, Paul Lewis and Howard Holton  take on IT Budgets and chew over how they really work in large and small organizations alike.

“CIOs rarely control how they spend IT money. In other words, it’s rarely their decision on how their budget gets split into certain types of transactions. But they sometimes, and sometimes more often than not, but just sometimes control when they spend money, and that might be monthly or quarterly. Sometimes, the bigger the organization it might in fact be weekly. And what they usually do control, though, is what they’re spending money on. And the reason why is because most (people) outside of IT don’t know what that IT spend is,” Lewis stated. “They wouldn’t know a firewall from a compute device from capacity and storage. They’re just words to them.”

“Ultimately, the budgets are still divided into these buckets,” explained Holt. “You have an operating expense budget—these are things you spend money on but that are not depreciated; they’re not owned assets by the company. Then you have a cap ex budget, and these are assets that are owned by the company and depreciated over time. That’s probably the most valuable thing for people who don’t have any kind of finance background or any serious P&L to understand because those things are handled drastically differently for tax purposes. And thus, the CFO cares a lot on what those two buckets are.”

According to Holt, the IT/CIO relationship in small organizations tends to be tight, which although allows for more influence on how money is spent, but with stricter budgets. In larger organizations, however, you have more freedom of cash and budget. Regardless, shifting funds from one bucket to another is not something that is ever going to be done on the fly in any organization of any kind.

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