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What to Consider When Planning Your Communications Technology Budget
According to Gartner Research, enterprise technology spending in 2023 is forecast to grow at least 5% -- but not all technology spending is equal. After a few years when organizations were spending big money to launch, upgrade or expand their communications-related technology infrastructure, the boom is over. Communications services spending actually dipped in 2022, and is forecast to come back only 2.4% this year.
So if you're in a position where you've got to figure out to make your 2023 communications technology budget go further without significant upticks in spending, it makes sense to examine your budget critically. The checklist below can help streamline the process.
Step One: Gather the data you need to establish baseline spending.
Before you can budget for the year ahead, it helps to have an accurate assessment of where and how you've spent money in past years. Here are the questions you need to ask to ensure you've got an accurate picture of what your organization spent on communications technology in the last year.
Assess how much you spent on the following recurring expenses:
- Fixed line services for voice and data
- Premise or cloud-based telephone system including maintenance charges and licensing fees
- Data network charges, including fees for hardware, maintenance, and licensing
- Mobile services and equipment
- Video conferencing and related services (Zoom, WebEx, etc.)
- Cloud-based services such as Azure and AWS
- Cloud-based collaboration and communication application suites such as Office 365 or Google G-Suite
- Other software as a service (SaaS) fees and seat licenses
Be sure to also assess recurring overhead costs:
- Professional services - consultants
- Employees to manage communications technology – both technical and administrative
- Office space for communications technology employees
Finally, take a look at expenses that are not likely to recur:
- Capital projects that took place within the past year
- Various one-time, non-recurring charges in each category e.g. installation charges)
- Late fees
- Early termination penalties
- Large credits or refunds received that may distort your actual expense by reducing it.
After you've collected numbers for all these categories, you should be able to derive reasonable accurate totals for:
- Fixed monthly costs by vendor
- Variable monthly costs by vendor
- One-time charges by vendor
This will help you forecast what your monthly recurring expenses for the upcoming year are.
Step Two: Identify Your Costs and Build Your Budget On Them
Once you are sure you have a good number for what was spent last year, consider what will change in the coming year that will increase or decrease the expenditures. Below are a list of factors that could affect your spending. Once you determine which of these will impact an organization, find the cost and add that to the annual budget in addition to your recurring monthly expenses.
- Communications service providers are in the process of abandoning support for “legacy services” typically delivered on copper facilities to your premises. If you plan to keep some of these services (dial tone lines for example) for the short term, the cost is likely to increase significantly. If you decide to replace these services, the cost will change as well.
- If any of your existing locations are closing or new locations are opening, that will affect spend. New locations may also require one-time charges for equipment and labor to get them set up.
- Changes in remote work, hybrid work and return-to-work policies could impact spending in mobile, video conferencing, seat licensing and facilities categories. It is important to work with HR and upper management to determine how employee location will affect communications spend.
- If your your organization is transitioning to a new type of network connecting multiple locations, that could affect ongoing costs. Traditional MPLS networks are being replaced with SD-WAN technology for substantial reductions in ongoing costs. Make sure the old billing stops as services are replaced)
- Taxes and surcharges can add 20 percent or more to your communications service provider costs. Some charges such as those for the Universal Service Fund can increase each year. Ask your service provider representative to provide the detail of what taxes and surcharges will be added to your monthly bill.
- Are you paying month-to-month rates for services that would be considerably lower cost if you put them under contract? Ask your communications service provider to give you an estimate of how much the savings can be. Do not sign a contract for more than two years, as this may have the reverse effect of locking you in to rates that are otherwise coming down.
- Have you identified the business purpose of all the communications services you are buying? Many organizations continue to pay for services no longer needed. Review this before you finalize your budget. You may need to do an organizational audit to see which departments and employees are using these tools and subscriptions, then work to see how business-critical continued access would be.
- For services whose cost is usage-based (not fixed), try to estimate which usage costs will increase and which ones will go down. This is where you will also want to work with different departments to audit how services are being used and whether there is steady use or seasonal use cycles. Ask your service providers if alternative plans are available for existing service that provide unlimited usage and compare that to current costs.
- Anticipate new equipment purchases. o The beginning of the year is a good time to make sure your communications technology records are up to date. Include vendor name and contact information, account numbers, circuit numbers (where applicable), which services are under which contract, location, business purpose and monthly cost. Making sure this stays accurate as changes are made throughout the year will make next year’s budgeting process go more smoothly.
Step Three: Build and Maintain Your Budget-Related Relationships
In addition to tracking expenses, it's important to look at the human side of the budget – the people who will make final decisions on how much to spend and how to identify that spending in the overall organizational budget. So in addition to collecting data and putting together the numbers, build the relationships:
- Develop an understanding of your organization’s approach to budgeting if you do not already have one. Talk with your organization's financial officers and determine what money is available to you, what area of the overall budget it falls under, whether you can transfer funds easily from one spending category to another, and whether your annual budget stays steady even if you come in under costs for one year
- Cultivate a relationship with the finance department and meet quarterly to track how you're doing in relation to staying within the budget.
- If you need help with identifying your expected annual expense and areas likely or it to increase or decrease, consider bringing in one of the Expense Audit/Management specialists in the Society of Communications Technology Consultants and click on “Find a Consultant.”