With each passing year, businesses spend increasingly aggressive portions of their annual budgets on technology. Those with a clear understanding of their technological needs are poised to spend wisely and reap the benefits of their investment. While it’s important to make continuous investments in technology to stay on the leading edge, those investments need validation. Avoid “technology for technology’s sake.”
Accurate evaluation of IT needs is a critical first step in ensuring your budget and resources are allocated efficiently. As you approach the question of technology at your organization, make sure you understand how to correctly evaluate need — and chart a path forward based on careful consideration.
Consider top-level business goals
IT assessments start at the top — specifically, with top-level business goals. This means identifying the key objectives driving the direction of the business and the ways technology can support them. For example, if your primary business goal is to drive sales and foster customer satisfaction, your IT needs might include investing in a customer relationship management (CRM) system to better track customer interactions and provide more personalized service.
There’s also a forward-looking element to this. As businesses grow, their technology also needs to change. Planning is crucial and will ensure your technology investments remain aligned with your business goals, even as they evolve. Thus, conducting regular IT assessments is a useful way to identify any gaps or opportunities for improvement and make adjustments to fit the mission.
By considering how technology can help drive top-level business objectives, it becomes easier to prioritize the investments most likely to have the greatest impact on your organization's success.
Conduct an audit and inventory
While determining goals and objectives is a good start, it’s also important to conduct an audit and inventory of your current IT infrastructure and related budget before pursuing any new investments or strategies. This involves looking at all hardware, software, and other technology assets your organization uses, while evaluating their usefulness and longevity.
When conducting a technology inventory, look at whether your IT assets are optimized to meet your organization's needs for the moment and for the future. Are they outdated or underutilized? Look at hardware and software and perform a cost-benefit analysis. Are you getting out more than you’ve put in? If not, is there a way to capitalize that investment before labeling it a sunk cost and writing it down?
Speaking of write-downs, take stock of where your technology is from a depreciation standpoint. Look beyond book life — the period during which an asset can be depreciated on a balance sheet — and instead consider the useful life of your IT assets: the length of time they can effectively serve your organization's needs. If the technology still works and is supported, why replace it?
Remember, conducting a thorough audit and inventory of your IT infrastructure is an opportunity to be critical and aggressive in assessing your organization’s needs. Use your findings to make informed decisions about how to optimize future tech investments.
Identify gaps and improvement opportunities
After a successful audit and inventory, the next step is to identify any gaps or improvement opportunities in your current IT infrastructure. Where are you coming up short today, or where will you be behind tomorrow if you don’t invest in tech today? Again, this harkens back to top-level goals.
Gap analysis is a key driver in planning, budgeting, and resource allocation. By identifying shortcomings and improvement opportunities, you can prioritize investments and allocate budget and resources more effectively. This also opens the door to a conversation about whether to allocate in-house resources or outsource certain IT functions. For example, if your organization lacks the resources or expertise to manage its own cybersecurity, it may be more cost-effective to outsource these services to a third-party provider.
Not every gap needs to be filled immediately. When you have a clear understanding of where you’re coming up short vs. what your objectives are moving forward, you can prioritize where and how you invest in IT solutions to fill those gaps.
Determine your IT budget
The last step is always the most daunting: budgeting and allocation. Often, it comes down to CAPEX vs. OPEX and where it makes sense to spend upfront vs. amortize costs. There is no one-size-fits-all solution, and the decision usually hinges upon the confluence of variables determined in the IT assessment. Create a dashboard that accounts for the total IT budget:
Combined with your technology volumes, you can create benchmarks for each service and compare your costs and percentage costs to best practices.
What’s important right now? What investments can wait? By prioritizing needs, you can avoid investing in unnecessary technology and optimize your resources for the greatest impact on your business goals — and ROI expectations.
Regarding ROI, it’s worth considering what can occur without proper budgeting foresight. Failure to set expectations about capitalization and ROI can result in “technical debt,” where investments in technology fail to provide long-term benefits — and instead create ongoing expenses. Budget with a mind for need and be realistic when looking at serviceable life and ROI over that life.
Put in the time to understand your needs
Accurately evaluating technology needs is crucial for the success of any organization. It requires a comprehensive understanding of business goals, a thorough analysis of current IT infrastructure, and a realistic budget. More importantly, it demands a level of criticality that ensures responsible investment in tech, both in the present and for the future.
It’s also important to remember that technology evaluation is an ongoing process. Monitoring and evaluating IT infrastructure regularly is essential to ensure it continues meeting the changing needs of the organization and the rapidly evolving pace of technology.
To learn more about IT assessments, dashboards, and benchmarks, contact the experts at Windsor Group and ask about our industry-unique engagement model.