IT funding potholes

Organizations should know how to budget and pay for IT products and services -- they've been doing so for more than 50 years. This is not rocket science. Unfortunately, many organizations continue to make the same mistakes year after year.

Don't fall into these common funding potholes:

Pay a fair price for important IT products and services. Suppliers that offer superior service at a fair price, but not the lowest price, often offer a better value than suppliers that provide marginal service at the lower price.

Don't pretend that ongoing costs don't exist or will be covered elsewhere. While ongoing costs may mean that a proposed new investment does not make sense, don't delude yourself and your organization by ignoring them. When the costs have to be paid, you will be in for a nasty surprise.

Clearly define the scope of all services in all contracts. Don't agree to an incomplete description of deliverables that will allow hungry vendors to milk your budget dry.

In a more typical case, this happens when the buyer is negotiating for several modules within a suite or for licenses to cover a single business unit. The vendor offers "today and today only" bargain pricing for additional modules or business units. The project team assumes that it will be easy to get agreement to install the additional modules. While these new licenses are sometimes used, in many cases they are never implemented and become shelfware.

When buying software, be clear where and when every license will be used. If you take a limited time vendor offer for additional licenses, be sure to get support from the other executives. Without that agreement, if the additional licenses are not implemented, you may be held responsible for their cost.

Win the depreciation/replacement wars by demonstrating that lower support costs will pay for the new equipment.

In other cases, bad budgeting decisions stem from a belief that expenses are always better in somebody else's budget. In addition to calculating the total return from an investment, be sure you understand the impact on every affected department's budget.

Budgeting is a complex and tricky balancing act plagued by a number of unpredictable events. Since organizations make these mistakes for different reasons, it is nearly impossible to account for them all. When faced with a budget pothole, try to determine if the other individuals don't recognize the pothole or if they have another agenda. Don't fall into these familiar IT funding potholes this year -- it's really expensive to climb out!

Bart Perkins is managing partner at Louisville, Ky.-based Leverage Partners Inc., which helps organizations invest well in IT. Contact him at


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