The State of Montana's shared-services IT department adopted investment-based budgeting. While learning the method required an investment of time, selling the resulting budget was easy. (15 min)

SUMMARY: Like many IT organizations, in the past their budget forecasted what each manager planned to spend. IT allocated these costs to clients based on high-level drivers such as headcount.

Allocations inevitably led to resentment, complaints about the cost of IT, and attempts at micromanaging IT to reduce the allocations. And without a link between costs and deliverables, clients expected IT to respond to every new demand without incremental resources.

With investment-based budgeting, IT leaders were able to show clients the true cost of all the products and services each agency consumed.

This empowered clients to control costs by deciding what they would (and would not) buy from IT. It managed demand, while building appreciation of the value IT delivers. It also matched expectations to resources, a relief for IT staff.

IT was also able to explain how its (limited) general funds were applied to State-wide services such as standards, policies, and plans.

Furthermore, the rates that were extracted from the budget data allowed IT to benchmark its costs against both decentralization and outsourcing, proving that shared-services IT delivered the best value.

Complete transparency built trust such that the budget was quickly accepted by clients, the State Budget Office, and the Montana State Legislature itself. In fact, IT's budget was approved by the Legislature with no questions!

Doug Volesky, head of the IT Business Office, tells their story in a candid, sincere 15-minute audio interview.