The budgeting process is of critical importance to IT and business professionals in our subscriber base; it is perhaps even more important nowadays as we begin to see a recovery in IT spending and, increasingly, a shifting of priorities away from a narrow focus on cost cutting and efficiency. It is within this context that we at Cutter Benchmark Review decided to take stock of current budget trends and priorities. We wanted to do so at a time of year when we could get good data (i.e., your organization has begun to think about its next budget and the priorities it wants to pursue), provide useful results (i.e., this issue comes out before you have closed your cycle), and offer practical guidance.

The survey is rather on the long side -- perhaps explaining why we received a smaller number of responses than we typically do -- but it was our intention to be exhaustive on this subject. The survey is articulated in seven parts:

1. General patterns of IT spending

2. Expense and capital budgets for the central IT organization

3. Cost recovery of corporate/centralized IT

4. Relationship between central IT and business-unit IT

5. Staff budgeting

6. Project budgeting

7. Outsourcing

If you are a faithful CBR reader, you will recall that in February we debuted our annual IT trends issue -- we intend to publish an issue on IT trends at the beginning of each year. This month's issue on IT budgeting is our second annual topic. For both of these areas, we intend to do some year-over-year trending and to draw more long-range conclusions as we collect more data in the coming years. Keeping with the tradition of CBR, our objective is not only to benchmark what is happening, but also to provide practical guidance and food for thought as you define the optimal budget and priorities for your own organization.

Our academic contributor this month is Dennis Adams, Associate Dean of Graduate and Professional Programs, C.T. Bauer College of Business, University of Houston (USA). Those of you who follow CBR already know Dennis, as he was the academic contributor for our issue on IT trends. Providing our view from the field is another cast of characters well known to Cutter clients: Bob Benson, Tom Bugnitz, and Bill Walton, all Beta Group members and Senior Consultants with the Cutter Consortium Business-IT Strategies practice. Leading the effort for The Beta Group is Bob.

Dennis's contribution begins by painting a picture of the historical context that has shaped today's budget pressures and budgeting priorities. Within this context, Dennis provides a detailed analysis of the survey results. I particularly draw to your attention his insight about potential problems with the accounting of energy costs, his predictions about IT staffing shortage, and his observations about the need to better scrutinize IT budgets to ensure that costs are fairly allocated to the business units. Dennis concludes his article with a set of practical guidelines that will help you structure the budgeting process in your own organization.

The Beta Group brings years of consulting, writing, and educational experience to bear in their truly exhaustive article. Bob systematically analyzes the survey results and draws practical implications for management by marrying the survey evidence and the firsthand experience of The Beta Group. Their contribution is articulated in five sections: an analysis of respondents, variability of IT costs, management of IT costs, management of IT cost recovery, and conclusions. I specifically draw to your attention Bob's analysis of the variability of IT expenses amongst respondents and the implication for the use of such common benchmarks as percentage of revenue. One message emerges loud and clear from this contribution: you must understand the drivers of IT cost in your organization, as they are the basis for all budgeting decisions. Bob concludes The Beta Group's piece with a set of immediately actionable guidelines for optimizing the budgeting process.

Budgets serve an a priori planning and communication role as well as a control and monitory a posteriori role. I hope that you will find this issue of CBR packed with useful data that helps you prepare your own IT budget (planning role) and survey-based ammunition that helps you back up your decisions with evidence (communication role). As always, the insight and guidelines brought to bear by our contributors should help you refine your own thinking about the appropriate course of action in your own organization.