Budgeting Series – IT Budget Cycles

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Aug 8, 2023 by Brent Earls

IT Budget Cycles

If I’ve said it once, I’ve said it a dozen times – creating your IT budget can be a misery. If you think they’re easy, you probably don’t have many variables feeding into them. Not only do you have to deal with OpEx vs. CapEx and on-premise “subscriptions” hiding behind CapEx expenses (read more about this here), but you also have to worry about how your company’s IT budget cycles really work.

There have been various paradigm shifts over the last few years –  virtualization, hyper-converged systems, the cloud, etc. All of these can affect your IT budget cycles in different ways – along with how you get billed. Of course, this also means it can affect how your business budgets in general.

IT Budget Cycles – Virtualization

As a quick example, let’s go back to the olden times – back before we all had grey hair, coke-bottle glasses, and walked with a hunched back and cane – 2005-2010. Back then, it was very common to have a separate physical server for every workload. When that was the case, it was also common to have those servers purchased at different times to stagger their replacement costs.

For example, one might buy four servers in 2005, four in 2006, and four in 2007 with the plan to replace those first four in 2010, the next four in 2011, and the next four in 2012. Essentially, we could budget a similar cost every year and go through our budgeting machinations.

Then virtualization came around, and suddenly we needed significantly fewer servers. Maybe now we only have three physical servers, so we just used the newest three for VMware, the other new one for Veeam, and then bought a new SAN.

Wow, we just saved a lot of recurring money. However, we ran into a new problem – infrastructures don’t quit growing. When the time comes to replace those physical servers, we need to replace them with considerably larger physical servers that cost more money. So, maybe we stagger them and only replace one or two a year, and then replace the SAN for a really big expense every five years. We’ve still staggered our budget cycles a bit, and can continue budgeting roughly the same.

IT Budget Cycles – Hyperconverged Systems

Now we hit the era of hyper-converged systems, and… everything has to be replaced together. There’s no “buy storage separately from servers.” You buy them together – but for a commodity hardware cost… with a boatload of software costs.

With numerous solutions, we can add newer nodes to an existing cluster, but only with very specific restrictions. It’s no longer the wild-west of “whatever hardware you want” that we were used to with virtualization. Now our budget becomes HUGE replacements every few years, and then nothing in between. To combat this, many people started to use leasing, essentially turning a monstrous CapEx into several OpEx.

IT Budget Cycles – The Cloud

Next is the era of the cloud. Now your expenses vary on a scale that can be as small as hours or days.

If you have a properly designed ‘cloud’ app, it could cost 10 – 15 times as much in a busy month when the app scales out than it would in a non-scaling month – which can be great if it works out to something similar to what you were paying on premises. And if that’s the case, you just saved a LOT of money in the other months.

Is your cloud app ready, though? Does it have the ability to scale like that? Can you truly leverage the benefits of the cloud? If not, you will most likely end up spending WAY more than on premises to run the same workloads in the cloud.

So, let’s say your app is cloud aware – how do you know what your expenses are going to be at any given time? In short, you don’t.

There are loads of calculators out there, but they’re assuming you know EXACTLY what your workloads are, and even then, the prices still change as cloud providers see fit. You only truly know when you get the itemized invoice, which can be 30 pages of 12-point font on everything that costs you money measured in hours. Enjoy crunching those numbers to build your budget.

So… what are we to do?!

Stay tuned for our next blog, which will break down exactly how you should build your IT budget.

Learn more about making cent$ of IT budgeting!

Need help figuring out your business’s IT budget cycles, and how you can plan accordingly? Contact us by calling (502) 240-0404 or emailing info@mirazon.com.

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