Posts Tagged ‘forecast’

Technology Planning via Life Cycle Management

In a previous post, I introduced the idea that technology planning and budgeting can be a paradox.  The opposing forces of the business’ need to budget and technologies rate of change, can result in a lack of a coherent trajectory for technologists.  When I was first tasked with the responsibility of managing a technology group, the primary means of developing a multi-year technology budget was to leverage a life cycle management approach.  Essentially we assessed the amount of money spent on equipment and determine the number of years this equipment should provide usable service.  With these two values, we could then fill out a multi-year replacement budget plan.  For instance, if we spent $40,000 on a firewall and it should provide us useful service for 4 years, then every four years we’d need to spend $40,000 to replace the firewall.

The primary benefit of this approach to budgeting, forecasting, or planning is that it establishes a predictable funding schedule.  Of course this schedule is based on the assumption that what we spent previously for the technology, is what it will cost to replace the technology.  Moore’s Law is the chief contributor to this assumption, and for many technologies this assumption is valid.

The difficulty of such an approach is that if doesn’t address incremental upgrades or enhancements, which fall outside the life cycle window.  Another difficulty is that this approach fails to encapsulates features or service differences or opportunities.  For example, when I first started purchasing wireless equipment the scope of this function was narrowly defined to provide an overlay or convenience.  Today, wireless networks are the primary networking medium students, faculty, and staff use for internet connectivity.  Had we solely utilized the life cycle management approach to budgeting, we’d could never appropriately fund the equipment to meet the increased demand and additional features.  A third difficulty with this type of approach is that the default motivation to replace equipment is because it’s funded.

While not perfect, leveraging life cycle management can be useful in developing technology spend forecasts.  It’s relatively easily to construct, give the amount of industry information related to replacement cycles.  However, such an approached doesn’t really provide a narrative or articulate where the technology or an organization’s use of the technology is going.

Technology Budgeting Paradox

August 24, 2015 1 comment

As one of the IT Directors for a university, I often find myself straddling the demands of technology and the needs of the business.  Often, this precarious balancing act reaps benefits when technology can be leveraged to address business challenges.  Of course there are occasions when these two worlds end up contradicting each other, and I’m strung by opposing forces.  This later experience typically rears itself when the business is crafting a multi-year budget, and they are asking for technologists to identify spending needs for the next five or ten years.  The technology practitioners, given this request, throw up their hands in disgust proclaiming that the rate of change within technology makes it impossible to predict spending patterns.

To the technologists credits, it’s unlikely we could have predicted the impact that mobile devices would have had in 2002, five years prior to the release of the Apple iPhone.  It’s just as unlikely that we could have foreseen the impact that cloud computing and storage would have had on data center operations in 2005.  But just because we can’t predict technology shifts and changes, shouldn’t preclude us from making educated guesses or charting a course based on the best information available.   It doesn’t require a fortune teller’s crystal ball to look at a trajectory and ask financial questions about where we are headed.  It also doesn’t mean that we can’t make necessary course corrections along the way.

Changes occur rapidly.  The business needs to plan.  Execution requires planning and coordination.  So like it or not, we should be able to pen a budget that is multiple years long and have specific dollar amounts associated with each year.  This process helps the business, and gives technologists a base line to assess deviations as the months and years tick off.