Budget Season!

Many of you are finalizing your 2025 technology budget proposals. If you haven’t started, get to it! Now’s the time to plan your innovation and budget strategy for next year. Project prioritization and budget planning are vital to creating strong collaboration across your organization. It can also be very frustrating, but it is important not to focus on outcomes. Your goal with your teams is to use this time to plan for projects that are aligned with the mission of the company. Whether or not your projects are approved, this is an opportunity for you to think of new and innovative ways to support the corporate vision and educate leadership on how technology can support their ongoing ambitions.?

Budgeting Categories

We all plan on four categories of efforts: 1) new solutions, 2) continued feature/upgrade delivery for assets in production, 3) maintenance and support, and 4) compliance and regulatory requirements.? As always, prioritizing the efforts is a challenge.? In most organizations, maintenance/support and compliance/regulatory are a planned part of a recurring technology budget.? These second two budget categories can fluctuate up and down year on year, but a five-year trend will provide directional guidance on the expected spending to meet those goals.?

Note - I am using “solutions,” “platforms,” and “assets” interchangeably to mean custom or commercial software and infrastructure platforms.?

The most time-consuming effort is evaluating the plan for new solutions or expanding an existing platform. A net-new solution will demand highly engaged collaboration from business leaders, product owners, engineering (including testing!), and support teams. A proposal for a new platform should include a clear definition of an MVP (minimum viable product) that provides for hyper-clarity on “what’s in and what’s out.”? This last part is critical.? Preparing a simple view of planned features for an MVP versus what will be left in the backlog goes a long way in avoiding misunderstanding and frustration at launch.? Bang the drum on what will be delivered into production!

A significant part of the annual planning effort must include budget items for new technology tools, innovation, and tech debt. It’s often difficult to get dedicated budgets for the above items, so integrate the associated costs of these critical improvements into a new solution build or a feature enhancement estimate. Tools and commercial products (like a rules engine) are hard to get approved as single-line items but are more likely to get green-lit when associated with a project and overall business objective.??

On tech debt, develop clear goals and outcomes and provide a detailed view of how reduced tech debt is critical to improving platform availability, sustainability, and the customer experience. In addition, plan on knocking out some tech debt in other proposed projects. Engineering leaders need to use each budget cycle to identify and prioritize their tech debt so that money (i.e., resources) can be allocated to “pay it off.”

Room to Grow? Or the Status Quo?

In budget planning, I’ve seen two (ish) styles of project expense management. Some organizations expect their employee headcount to grow or shrink based on budget approval. Other organizations demand that the same resource pool be used year on year. In other words, if there are 50 software developers in 2024, there will be 50 in 2025.? The project work has to match the existing resource contingent.??

In the second approach, the effort is complicated by determining whether your current resources are the right fit for new work or new tech. It simultaneously requires planning to reduce efforts in other areas of the organization.? This can be tricky as many senior leaders need help differentiating between technology skill sets.? Unfortunately, even in 2024, some people think all technology resources are interchangeable.? This is less and less the case as technology specializations are growing due to innovation and overall complexity.??

Plan the Work! Be Organized and Transparent

Regardless of the budgeting approach, it’s paramount that your teams have a well-defined backlog of projects that are ready for the prioritization process.? Each project should have goals/objectives (this should include a measurable success metric like revenue growth or efficiency gains), a resource plan, and a timeline associated with a feature set. As a leader, set the tone for the importance of expert planning and budgeting.? You are not simply proposing tech projects.? You and your teams are helping to set the technology strategy to help the company reach its annual goals. Thorough and transparent project/budget planning will foster trust between your teams and the broader organization.??

Oh Budget Season - It Can be a Slog

Budgeting and prioritizing can be a contentious process. Instead of only focusing on the outcomes, work with your teams to be strategic partners across the organization. Demonstrate that your technology goals are tightly connected to the company’s vision. Work closely across the enterprise as partners.?