It’s that time of year again. Your 2024 budget planning cycle has begun, or will soon. Despite lingering economic uncertainties, there’s a notably brighter outlook on the economy for the upcoming year compared to last year. While nobody has a crystal ball, a consensus is forming that IT spending will increase in 2024. As you work on your overall IT budget, you’ll want to be sure you factor in your new custom software development budget needs.
According to a report by Gartner, “The software segment will see double-digit growth this year as enterprises prioritize spending to capture competitive advantages through increased productivity, automation, and other software-driven transformation initiatives.”
In research done by ISG, they found that many companies allocate about half of their total IT budget to applications. Now more than ever, IT leaders face the vital task of aligning software development efforts with strategic business goals. With this in mind, here are five pivotal tips for preparing your 2024 new software development budget:
- Align with Strategic Business Goals
- Continue Your Digital Transformation
- Evaluate Historical Spending
- Assess Existing Technical Debt
- Plan for Security and Compliance
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Align with Strategic Business Goals
Technology remains a critical component of your company’s growth engine. Take time to understand the business’s key strategic goals and reflect on the opportunities to leverage technology to achieve them. Engage with stakeholders across the organization to understand priorities, identify synergies, and ensure that your budgeting efforts serve both short-term needs and long-term objectives.
There may be off-the-shelf software solutions ideally suited to get you to where you need to be. If that’s the case, it’s almost always best to go in that direction. You can then model out the anticipated implementation costs and associated licensing for use in your budget planning.
Alternatively, you may look to develop a custom application solution to meet your specific business needs. If you want to build your own platform that aligns with your organization objectives, you’ll want to start by thinking through your digital strategy and product plans.
Not sure where to start? The following post can help you determine what’s best for your business.
Continue Your Digital Transformation
You’ve undoubtedly started your company’s digital transformation journey at this point and now is not the time to stop. In fact, the rate of technological change and associated business opportunities has never been greater. This may include adoption of cloud-based solutions such as Microsoft Cloud Services, which tend to provide increased efficiency and lower total cost of ownership.
You may also want to consider adopting low-code platform solution development within your organization. Low-code solutions provide ample opportunities to streamline operations and automate your business workflow. They also tend to provide quicker time to value than traditional full-code development endeavors. Evaluate the tools that best suit your team’s needs and include them in your budget. It’s important to note that the full-code/low-code decision doesn’t have to be an either-or choice. You can use both, choosing the right approach depending upon your specific needs. You can also mix and match the two within the same software solution, if desired.
Evaluate Historical Spending
Spend some time reviewing your historical spending patterns. The past 18 months can provide valuable insights into trends within your business. Spend time analyzing the drivers so that you can better predict what to expect in 2024.
- Have IT related labor expenses increased? If so, is this tied to market increases in wages or perhaps you have grown your team?
- Maybe the business is asking for more from IT and will continue to do so in the coming year?
- Are your software applications operations and maintenance costs continuing to increase?
- Are these increases directly correlated to overall product growth and the delivery of business value?
- Or are you spending more and more just to keep things running?
Assess Existing Technical Debt
Technical debt can lead to increased maintenance costs, decreased efficiency, and potential system failures. By evaluating this debt, you can better anticipate the long-term costs and allocate resources accordingly in your budget.
- What’s the state of your current software platforms?
- When were they originally developed?
- Have they been regularly kept up to date?
- Are they leveraging modern cloud-based services such as Azure Web Services?
Ignoring technical debt often leads to a decrease in software quality. Addressing it through budgeting enables the implementation of necessary refactoring, redesign, or other improvements that can increase overall software quality and performance. Technical debt also slows down the development process as developers must work around existing issues or make changes to less-than-optimal code. By budgeting for technical debt reduction, you pave the way for more efficient development cycles in the future.
Finally, technical debt can hinder the ability to adapt to market changes, implement new features, or meet customer demands. Assessing and addressing technical debt aligns your software development efforts with business goals by enabling more agility and responsiveness.
Plan for Security Compliance
As cybersecurity threats continue to evolve, it’s vital to allocate sufficient resources for security measures. Compliance with industry-specific regulations should also be a key consideration in your budgeting process.
From a security standpoint, you need to ensure that you’re considering the increasing risks. Cyber threats are evolving and becoming more sophisticated. Proper budgeting in your software development endeavors ensures that you can invest in proper security measures to protect against these risks. You will also want to consider a budget allocation for proactive management and maintenance of your custom software application. The old saying, an ounce of prevention is worth a pound of cure, has never been more applicable!
There’s a rapidly growing tapestry of laws and regulations concerning data protection, privacy, and information security. These are being implemented at the federal, state and even local levels sometimes. Failure to comply can lead to heavy fines, legal actions, and damage to the business reputation. Regulations can change frequently, and budgeting ensures that resources are available to stay abreast of and implement necessary changes to remain compliant.
The 2024 budget planning cycle presents both challenges and opportunities for IT leaders. With indications of economic recovery and an anticipated increase in IT spending, now is the time to align your software development budget with strategic business objectives. By focusing on alignment with business goals, continuing digital transformation, understanding historical spending, assessing technical debt, and planning for security and compliance, you can position your organization for success in the coming year.
Remember, a well-planned budget is not just about numbers; it’s a roadmap that connects technology investments to business value. By considering these five key areas, you ensure that your budgeting efforts are not only responsive to the current needs but also proactively set the foundation for future growth and innovation.
Your 2024 software development budget is more than an administrative task; it’s a strategic tool. Leverage these tips to create a robust budget that supports your organization’s vision, mitigates risks, enhances efficiency, and drives competitive advantage. Whether you’re navigating the complex terrain of emerging technologies or simply looking to refine your existing operations, thoughtful budget planning is the compass that will guide your way.
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