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Technology Budgeting: A New Hierarchy for Innovation and Reducing Technical Debt



Virtually everything about the way we work has changed. Jobs and tasks are being redesigned to use more essential human skills augmented by technology. Full-time employees are no longer the primary source of talent since we hire contractors and gig employees. Yet many firms are still budgeting for and tracking their IT spending the same way they always have.


It’s time for a new approach.


Hierarchy for firm technology

We created the following hierarchy of firm technology based on helping hundreds of top firms with technology planning.


Let’s look at each of those levels in more detail.

  • Applications. Applications are where firms spend the most, and it’s going up every year. A standard increase of 3-5% per year won’t allow you to add new technologies and will hinder innovation and security.

  • Operations. This category is about keeping the firm systems active and connected.

  • Communications. Communications has transitioned to an IT line item in the past few decades due to our shift to cell phones and VoIP.

  • Security. Security can include both hardware and software. We still see some of these costs being tracked in traditional line items.

  • Innovation. In traditional firms, innovation gets whatever budget is left over.

The arrows on either side of the inverted pyramid are intended to show that the items firms spend the most on have the smallest potential impact. We spend the most time supporting the technology and initiatives with the lowest impact. We could leapfrog some of these issues if we invested more resources into innovation.


Investing in Innovation

The problem in many firms is that innovation is held back by technical debt. The concept of technical debt was first introduced by Ward Cunningham in 1992 and applied to software development. In essence, Cunningham said developers make decisions that speed up development in the short term, but when that “debt” isn’t repaid promptly, it continues to accrue interest and eventually increases complexity and cost in the long term.


An accounting firm gets into technical debt when it supports several versions of QuickBooks rather than transitioning clients to QuickBooks Online, has users on different versions of Windows, or runs other applications that are no longer supported. These decisions might save time and money in the short term, but eventually, current technology surpasses the firm’s technology and is no longer compatible with the industry.

When these firms want to start investing in automation or data analytics, they must pay off that debt first.

Changing the conversation around IT spending

Changing how you budget for IT can help you prioritize the right things, get out of technical debt, and start investing in innovation that will move your firm forward. But different stakeholders involved in the budgeting process have different priorities, so you need to know your audience.

  • Finance leaders, including the CFO, want to see a budget that includes line items from the general ledger. They’re interested in how much IT is spending on staff and personnel, software, maintenance, etc.

  • Firm leadership is most interested in security and larger projects. Some of your security budget might be rolled up into applications, but it’s helpful to break those costs out as much as possible for this audience.

  • Innovation leaders are most interested in the resources the firm is ready to dedicate to innovation.

Creating different budgets for each of these audiences (that all tie to the same bottom line) can help you explain your budget and spending differently for different audiences and get buy-in from stakeholders.

If you’re ready to start changing the conversation in your firm, download our Budget Template. And if you need help getting firm leaders in alignment on IT strategy, prioritization and budgets, Boomer Technology Consulting can provide objective advice that will help your firm overcome roadblocks and become future-ready.

 
Do you need help getting firm leaders in alignment on IT strategy?

Boomer Technology Consulting can help you prioritize IT projects and ensure they support the firm’s overall vision and strategic plan. Complete an interest form today to begin fast-tracking your firm’s success.

 

Amanda Wilkie, Consultant at Boomer Consulting, Inc., has a computer science background, but she’s not your average geek. With two decades of technology experience, Amanda has spent 13 years driving change and process improvement through innovative technology solutions working across firms of varying sizes in the public accounting profession. She has held strategic leadership positions in firms ranging from Top 50 to Top 10 including her most recent role as CIO of a Top 30 firm. Amanda is a recognized expert in the profession who regularly speaks and writes on blockchain and cryptocurrency and their impact on the profession.

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