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Budget Management vs. Expense Management

expense management

For any one that grew up with or has children, you’ll remember the classic Sesame Street feature, “One of these is not like the other”.  Simply put, they displayed four things and the viewer had to determine which was different.  Some were easier than others, although usually the answer was apparent.

Things are not so amusing and apparent in the world of technology expenses.  Basically, one dollar is the same regardless of where it’s spent.  But not all dollars end up being equal with regards to impact or importance.  How many times have we witnessed either a technology project, application or system become outdated even before it is fully implemented?  Yet we continue to spend a shrinking budget on many of those examples – creating a situation where we are spending good money (today) after bad (a decision made years ago).

It is often difficult to determine what is good spend and what is bad. When it comes to expenses, each organization will have their own requirements for managing the overall spend for technology. The following are a few thoughts concerning moving your organization into a more disciplined approach with regard to IT expense management:

Believing budget management is expense management

Budgets are a planning tool, used to help guide management once or twice a year on “where” to spend money. They can be sliced and diced in a variety of ways based upon what’s important at a given moment– people, assets, contracts, third party services, etc… As a planning tool, they work.  As an ongoing management tool, they don’t.  On the other hand, a fully implemented expense management system not only provides you with invaluable, up to date information on the actual spend, but it can also feed your budget planning system or process.  Allowing you to see actual dollars spent.  And if implemented properly, expense management systems will provide information about how effective that money was in supporting the business.

Not knowing which systems, applications, or service providers are over or under performing

Performance Management is a key area for IT operations, it allows us to understand if the systems or applications we are providing are doing their job.  But Performance Management is about the technology, not about how it supports business objectives.  There are reports on uptime, capacity, mean time between failures, suggestions on optimization, and so on.  How about information on how much it cost – from the initial purchase, to implementation, to maintenance, to support?  Are you actually getting the most from those dollars?  Is there a way to make any relevant comparisons?  Performance Management is about IT operations and service delivery.  Matching those key performance indicators to expense information (and actual spend data), you can start down the path of optimizing not only the systems, but also the fully integrated service that delivers value to the business.

Talking business without backup

IT executives today have to be able to talk the language of business.  In reality, they are pulling triple-duty; they have to keep the entire technology platform operating at peak levels (run the business), while being a technology futurist (transform the business), and now have the equivalent of a master’s degree in business (grow the business).  Depending on each organizations technology requirements, today’s CIO is sitting on the “hot seat” on a constant basis.  One way to improve your standing among your business peers is start the process of understanding how technology supports the business and the key strategic drivers.  If you do this by telling the story of how well and fast you implemented XYZ system or how quickly you answered questions, or you’re new user online portal – most of the other executives will nod while thinking to themselves “and how does that help me?”  Moving beyond the story of IT operations, start by showing how that new system or user portal supports a strategic initiative, then provide hard data about how much it cost, how much revenue it will support, or how it helped leverage existing technology without additional expense.  Start talking Top Line (revenue) and Bottom Line (expense) results.  That’s how you impress your business peers – not by endless charts and graphs about closing trouble tickets.

So, in reality, not every dollar spent on technology is the same.  Some move the business forward, while others help position the business for future growth and expansion.  Can you tell which one of these dollars is not like the other?