What craziness is this you spout? IT is the most expensive part of my organization! How can I give it zero budget?

The concept behind Zero Budget IT is simply that IT budgets are almost universally viewed completely wrong. This is true from the accounting department to upper management and C level folk. What I propose is simply a shift in philosophy (hence the title of this site) on how the spending is viewed and tracked.

When an accountant or a manager looks at a companies finances they see IT as a huge sink hole. They aren’t producing anything and they spend a huge amount of money. Even some less enlightened IT managers have been trained to think this way.

The problem with this view, and why it is not only wrong but dangerously so, is that the IT budget is rarely actually used by IT. The current trend towards fast activation SaaS, breaking away from your IT department to experience the freedom from them telling you no etc doesn’t have to happen. It makes a great marketing gimmick but doesn’t solve the core issue.

Everyone should learn the essential phrase “You can have it fast, cheap or well done. Pick two” and use it as their mantra when dealing with any sort of spending, including IT.

The reason an adversarial relationship exists at all is that IT is being given two completely contrary orders. Cut costs, and deliver everything the company asks for to accelerate the business. Given this they are left with the tireless task of mediation and explaining every purchase and budget choice they themselves didn’t even make.

Now that we’ve admitted the job is impossible you can see the utter ridiculousness of the situation. How can you honestly expect IT to know what something is worth to you? Why is it their job to tell Marketing or HR what they need or can afford? They can advise, they can propose alternatives out of experience and participate in the conversation sure. Make the decision or spend the money? DUMB! It only leads to a complete lack of understanding on a fundamental level of who is spending the money and why. Worse everyone is grouchy, and at the wrong people.

In all honesty IT should never say no unless it is for business or policy reasons, which again they should enforce but not dictate. IT is a service department and everyone knows in the service industry your answer should always be how much, not no. If your IT department is saying no for a budgetary not a business policy reason, something is wrong.

So how do we implement this essential shift in how the spending is viewed and let IT start saying yes instead of explaining other departments purchases? You give the department itself no budget.

But how can that work? Craziness you say yet again!

Actually it works right well. All the money is re-allocated to the departments who are actually spending it, and they need to assign it to IT when they need something.

Example, a workstation for an engineer. Why should IT decide what the engineer needs? Why should they be criticized for the spending? All they need to do is provide and condition whatever it is engineering orders. It’s the engineering budget, with a bit tacked on to pay IT for the time spend getting it ready and set up. If an engineering manager decides their developer needs a 24” monitor instead of the standard 20”, fine, that’s between them and their department budget.

This is called in finance parlance chargeback accounting. The IT budget now comes from doing things more efficiently or skillfully than another department could do it itself. It comes in increments reflecting the actual expenditures of the other departments.

No longer is the IT department spending a huge amount on an email server. The sales team is spending X per user, the marketing team Y (the difference is in usage) and the engineering team Z. IT has spent nothing except for it’s few employees, and even that money should come from payments for services rendered for other departments.

If the sales team is using help desk support a lot more than engineering, why shouldn't they pay a bigger portion of those employees salaries? If engineering usually want instant response where as HR is willing to wait, charge them differently.

Marketing wants a copy of photoshop for it’s hot new designer? IT shouldn’t look at it’s budget, it looks at the price of the license and says “sure, no problem, that will be $X please.” If that’s too much, Marketing can decide not to buy it, but at no point was the business value of the purchase determined or the license payed for by IT.

Need a set of new servers to handle a new project for R&D? Ok, they can buy them. IT will happy assist in determining specs, value tradeoffs etc. Advisors can actually serve this role much better without the pressure of cost cutting hanging over their head. Monetary pressure is on the people asking for the equipment, where it should be, as it will come out of their budget for the project.

Customer support needs an expensive license for their fancy phone system? Ok, that’s a support purchase not an IT one, get budget approval and then ask IT to up the licenses. Why should IT be put in a position to have to say no when they don’t need nor use the license?

This subtle shift does wonders for the relationship between departments, for budgetary discussions, and for over all company health.

Now what happens when you come to IT and say “my department needs this new software” ? They say “sure, lets talk about when we can do that for you.” There is a priorities, not a budget discussion. This is a much more productive relationship.

It also changes the way IT behaves towards other departments as the money relationship has changed. No longer do these departments need IT’s budget, IT needs theirs. Their salary is being paid in a very direct and obvious way by other departments. Think with this in mind your support folks might be just a little more willing to help?

This budget shift is not some magical silver bullet that will save your company millions. It will however change in a fundamental way the perception of the IT department and their relationship with the company.