So your company utilizes departmental budgets, but are they hurting themselves by not dedicating the time to plan out budgets on a per-project basis? I’ve seen it time and time again, the higher-ups create a yearly budget for a department but when a major project gets approved chaos ensues.
Consider this scenario: Mr. Andersen is a C-level executive (CEO/CIO/CTO/etc..) who has instructed Mrs. Kelley, the director of I.T., to head up a project to build out their networking infrastructure to support 10GbE to the desktops. Mrs. Kelley, in this case, will need to have an external vendor/contractor actually do the work for the project. Mr. Andersen places a deadline of 1 month for this project to be completed, not much time at all for a build out for a medium sized network. He also does not give the project a budget and instead decides to take the approach of collecting project quotes from Mrs. Kelley with the intention of just “knowing” what an appropriate quote will be. This is the most common mistake anyone in Mr. Andersen’s position could make and it costs companies hundreds of thousands of dollars per year. This scenario will play out with Mrs. Kelley distributing a Request for Quotation (RFQ) to a few reputable vendors, entertaining dozens of vendor walk-throughs and inspections, collecting quotes and then submitting the top picks to her superior, Mr. Andersen. Since it’s Mrs. Kelley’s job to make sure her network is as reliable and modern as possible she will naturally pick the quote that balances price, reliability and performance. Let’s say the final number comes to $20,000 from the top pick quote. Mr. Andersen sees this number and nearly faints. He tells Mrs. Kelley how the company cannot afford this kind of project and that she needs to find one for half of the cost if not more. So, Mrs. Kelley goes back to her handful of vendors and requests a re-quote with less reliable, slower performing hardware. The new quote comes back and even the economy-class quote is still around $13,000. Mr. Andersen hears the new number and is still dissatisfied, telling Mrs. Kelley that it’s still too high.
What has gone wrong here? It should be obvious that Mr. Andersen has wasted hundreds of employee hours, many hours of vendor time performing walk-throughs and creating quotes, and has effectively frustrated the I.T. department as well as any vendor who was unfortunate enough to have been dragged through the mud. On top of all that, and what is probably the most important result of all of this, the company looks fresh out of amateur hour.
This could have all been avoided had Mr. Andersen started the conversation by saying that he’d like Mrs. Kelley to build out the networking infrastructure to 10GbE with a budget of $9,000. Then Mrs. Kelley would have either said that it’s not going to happen and that the project would be much higher than that or she could have figured out early on, before too much time was wasted, that the project was not going to coincide with the budget and delayed the project until proper funds were allocated.