Budgeting ensures that predicted costs are matched by the budget, and that early warnings are given where this is not the case. Budgeting enables an organization to:

• Predict the money required to run IT services for a given period
• Ensure that actual spend can be compared with predicted spend at any point
• Reduce the risk of overspending
• Ensure that revenues will be available to cover predicted spend (where charging is in place)

Plan and Control Budgets is split into an initial activity and a recurring, ongoing activity.

Initially you have to establish the budgeting framework. This framework will be the base to plan and control the IT Budgets. This framework consists of three parts:

1. Information model

• Cost and IT entity alignment model
• General thresholds
• Plan of IT performance and capacity development
• Plan of IT costs and bills for individual user

2. Process and workflow

• Definition of the budgeting process (zero based budgeting)
• Definition of the periods to check the budget
• Definition of the escalation paths if a threshold is exceeded

3. Tools

• Data analysis tool
• Reporting tool

There are two ongoing activities that are entangled with each other. In the planning part you analyze, together with representatives from the business, the future trends for business development, processes and activities. You use this data as input to define the future IT budget, breaking it down to single IT entities, and the budget planned for these entities (starting with hardware, software, personnel, among others). To be able to control the budget, these entities have to be connected with context information; that is, how many person hours are planned for a certain project, and how much capacity is needed for a certain application. You will get this data from the IT plan.

This budget planning has to be aligned with the overall budget planning process. After the budget is defined, it has to be approved.

This activity is revisited in a defined period, to adjust the IT budget planning to the changing business needs.

Using the actual cost data and performance data as gathered in Perform Financial Accounting, you measure periodically whether the cost and delivered capacity and performance are in line with the plan data. This information is compiled into reports and delivered to the sponsors of IT.

If these reports show deltas bigger than the defined thresholds, you have to take counteractions:

• Discussion of the deltas and their reasons with the sponsor
• Replanning of the budget needed for this entity
• Re-approving the budget for this entity or stopping of this entity
• Addressing and discussing the topic of changing bills for IT

This activity is revisited in a defined period to analyze plan versus reality and start adjustments where necessary.