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Budget Management

BGM

The Budget Management (BGM) capability is the ability to oversee and adjust the IT budget to ensure that it is spent effectively.

Structure

BGM is made up of the following Categories and CBBs. Maturity and Planning are described at both the CC and the CBB level.

APlanning

A1Budget Scope

Manage the scope and depth of information relating to the categories of expenditure in the IT budget (for example, capital expenses, operations expenses, shadow IT, and so on).

A2Budget Processes

Develop processes to manage budget planning and expenditure (such as processes to manage stakeholder involvement, processes to align the budget planning with business planning cycles, processes to manage payments, and so on).

A3Business Alignment

Engage stakeholders from the wider business in setting the IT budget to ensure that strategic priorities are reflected in the IT budget priorities.

BPerformance Management

B1Budget Monitoring

Monitor and report to stakeholders on actual performance against planned expenditure.

B2Variance Management

Manage deviations of expenditure from the planned budget (by, for example, establishing escalation channels, and taking corrective actions).

B3Predictability

Manage IT expenditure within budget targets and variance ranges.

CGovernance

C1Budget Governance

Establish oversight structures and decision rights to set IT budgets and manage allocations.

C2Accountability Assignment

Establish accountability for managing the expenditure of IT budgets.

Overview

Goal & Objectives

An effective Budget Management (BGM) capability aims to:

  • Make budget allocation decisions in a deliberative, participatory, and transparent manner.
  • Achieve predictable IT financial performance by establishing responsible fiscal management and clear lines of accountability.
  • Maintain the flexibility to respond to short-term challenges and opportunities by allowing managers to reallocate IT funds across budget categories and projects at their discretion.
  • Make sure that expenditure matches the allocated budget. Identify and plan for any likely overrun in advance.

Scope

Definition

The Budget Management (BGM) capability is the ability to oversee and adjust the IT budget to ensure that it is spent effectively.

Improvement Planning

Practices-Outcomes-Metrics (POM)

Representative POMs are described for BGM at each level of maturity.

2Basic
  • Practice
    Explicitly define the approach for relevant stakeholders to participate in planning the IT budget.
    Outcome
    Participatory planning of the IT budget is likely to lead to higher levels of support for it.
    Metric
    Percentage of identified key stakeholders who are involved in defining IT budget planning approaches.
  • Practice
    Prioritize which IT budget items should carry the highest levels of expenditure monitoring.
    Outcome
    Expenditure monitoring allows greater levels of visibility, planning, and predictability.
    Metric
    Extent to which actual expenditure matches budgeted expenditure.
  • Practice
    Establish formal IT budget oversight structures with the support of the corporate finance function.
    Outcome
    Budget oversight benefits from corporate finance's expertise.
    Metric
    Percentage of IT expenditure approved using IT budget oversight structures.
3Intermediate
  • Practice
    Designate managers accountable for forecasting and managing actual expenditure.
    Outcome
    By assigning accountability, there is greater likelihood that budgets will be effectively managed.
    Metric
    Percentage of IT budget and associated expenditure assigned to designated managers.
  • Practice
    Ensure budget allocations across IT projects are fully aligned with the IT strategy.
    Outcome
    Confidence increases that the IT budget supports the implementation of the IT strategy.
    Metric
    Percentage of projects funded that are aligned with the IT strategy.
  • Practice
    Review deviations of expenditure from the IT budget, and take corrective action as required.
    Outcome
    Run rates for IT expenditure are more reliably predicted, and budget targets are increasingly met.
    Metrics
    • Percentage of IT budget targets that are met.
    • Percentage of IT budget variances satisfactorily resolved.
  • Practice
    Ensure that the potential impact of proposed IT budget expenditure is taken into account in the budget for future years.
    Outcome
    The knock-on demands of the current IT budget commitments can be better predicted to increase future budget flexibility.
    Metric
    Budget split between predetermined (often longer-term) versus discretionary budget expenditure.
4Advanced
  • Practice
    Expand IT budgeting to include all of ‘shadow IT’ expenditure.
    Outcome
    Total IT expenditure across the organization is clarified, enabling identification of more synergies and variances.
    Metric
    Percentage of total IT expenditure accounted for by the IT function.
  • Practice
    Involve all relevant stakeholders in IT budgeting and ensure that the budgeting process is aligned with business planning cycles.
    Outcome
    There is increasing stakeholder participation in recognizing and resolving budget variances.
    Metrics
    • Percentage of identified relevant stakeholders participating in IT budget planning and management.
    • Number of unresolved budget variances.
  • Practice
    Broaden the governance structures to authorize appropriate individuals to facilitate budget reallocation.
    Outcome
    Flexible governance structures facilitate appropriate responses to unanticipated events.
    Metrics
    • Number of IT budget changes per quarter.
    • Number of budget reassignments.
  • Practice
    Automatically escalate expenditure that deviates from the IT budget plan.
    Outcome
    Key stakeholders are immediately informed of variances to encourage a timely response.
    Metric
    Number of unresolved budget variances.
5Optimized
  • Practice
    Advocate and identify budget management improvement opportunities across the organization.
    Outcome
    The IT budget is predictable, inclusive, and continually improved.
    Metric
    Planned budget versus actual expenditure.
  • Practice
    Ensure that the IT budget continues to be actively managed for flexibility, so that the organization can capitalize on opportunities to invest in innovation.
    Outcome
    Budget management is seen to enable innovation.
    Metric
    Percentage of IT expenditure invested in innovation.

Reference

History

This capability was introduced in Revision 18.10 as an update to Budget Management (16).