5 Things to Consider When Building a Budget for Existing Custom Software

By now your company’s budget planning cycle is in full swing and your IT budget is starting to shape up.  You’ve thought about the various IT needs of your organization and their associated expenses including custom software, licensed software, infrastructure, hardware, security, staffing, and more.  However, have you included a planned 2023 budget for your existing software platforms?   

While overall IT budgets are forecasted to remain solid in 2023 by many estimates, including recent research performed by Bain Capital, spending in the coming year will likely garner more scrutiny.  A June 2022 survey of more than 1,400 IT professionals conducted by Spiceworks Ziff Davis indicates that while 51% of organizations plan to increase their IT budgets in 2023, half plan to take precautionary measures to prepare for a potential economic slowdown in 2023.    

Far too often it’s only the new software development projects that are front of mind and taking into consideration in budget planning cycles.  As part of your budget planning process, it is important to consider the needs of your existing custom software platforms in the coming year.  This is particularly important for heavily used mission critical custom software platforms that your business relies upon for daily operations.  

Doing this will help ensure that your existing business operations continue to run smoothly   

  • Baseline Operations 
  • Software Performance Optimization  
  • Technical Debt Management 
  • Break-Fix Support  
  • New Feature Development  

Need help getting your plans together, contact us!

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Baseline Operations  

Every software application has basic set of costs for operations.  We often think of this as what it takes to keep the lights on.  In the case of gas-powered cars, it’s the cost of the gas, insurance, etc.  In software applications this includes things like your hosting infrastructure, licensing for any third-party components, DevOps, pipelines, etc.  These regular occurring costs should be identified for your core software platform(s) needed to keep your business running smoothly and included in your budget planning.   

Not sure how to budget for this?  Start by identifying your current expenses of the past year, which should serve as a good starting point.  Then consider expectations for potential growth in usage of your platform along with potential storage growth from resulting transactional data accumulation.  Oftentimes conversations with business leaders who depend upon the software application the most are insightful.  What are their budget forecasts for the coming year?  If their forecasts call for business unit growth, use these projections to forecast potential growth in your baseline operations expenses in the coming year.

Software Performance Optimization 

Beyond basic baseline operations, allocate a portion of your budget to software performance optimization during the year.  Just as your car needs routine maintenance (e.g., oil changes, tire alignments, etc.), your software products need similar upkeep to perform well and avoid breaking down.  These do not need to be major endeavors but should be accounted for in your budget planning processes.  

While budgeting for your software performance optimization, don’t go after every possible thing that could improve performance.  Instead, look at some of the critical chokepoints in your software performance.  Often addressing a few of these will yield significant improvements.  Think about the time and effort needed to do some basic system monitoring and performance analysis during the year along with time needed to remediate and include this in your existing custom software budget plan.   

Not sure how to cost effectively and pragmatically go about software performance optimization?  You can learn more here. 

Technical Debt Management  

After considering your quick hit, high value software application performance optimizations, look at your software application’s broader set of potential needs.  Going back to our car analogy, your car needs major maintenance (brakes, timing belt, battery, etc.) periodically over time to prevent breakdowns.  Similarly, every software platform has some form of technical debt that accrues over time.  You don’t need to try to tackle it all in a single year but ignoring it all together is a bad idea.   

Considering what some of these needs may look like.  Things to consider include 

  • How old is your software platform? 
  • Have you been proactively managing it over time? 
  • Is it running in a cloud-native PaaS environment? 
  • Does your team seem to be spending more and more time on basic support and maintenance? 
  • Are users happy with the system? 

Answers to these questions will help guide your technical debt planning and potential 2023 budget needs to address.    

Interested in additional insights into identifying and proactively manage your technical debt?  Learn more about how we do so here  

laptop with code

Break-Fix Support  

Regardless of how well you manage your technical debt and perform preventative maintenance, your software platform will need some break-fix support during the year.  Much in the way that unexpected repairs arise for your car (e.g., flat tire, cracked windshield, etc.), your custom software applications will need some additional upkeep that you’ll want to plan for in advance.  A look back over the past three years will often provide valuable insights into what to expect for the coming year.  Having an honest conversation regarding how well you’ve been addressing technical debt over time can be helpful.  If it’s something you’ve ignored due to lack of resources or other competing priorities, you should expect your break-fix support expenses to be a bit higher in the coming year and budget accordingly.   

New Feature Development  

Finally, don’t forget about new features and functions that the business team may want developed next year.  These could be simple improvements to existing functionality or new components that drive new revenue opportunities for the business.  Oftentimes there can be greater return on investment in developing new features and functions within an existing software platform than attempting to build new greenfield applications.   

Spending time with the application product owner will give you a good sense of what these potential opportunities look like.  If there is not a formal product roadmap and associated backlog for the application, some conversations with the business team that depends upon the custom software application the most should provide insights into potential new features to budget for 2023.  Rather than try to estimate them all out in detail, do some high-level prioritization and planning to give it some basic structure.  At MercuryWorks, we’re fans of T-shirt sizing or the MoSCoW method of prioritization to inform budget planning processes.   

Summary 

The above tips will help you think through five key components to consider when developing your budget for your existing custom software platform(s).  This process is as simple or as involved as you’d like.    

Don’t let it overwhelm you or let it be something you put off until the last minute and attempt to do with a few quick last-minute SWAGs and hope for the best.  Budgeting is an iterative process that should take a couple of cycles before you get to a final version that feels right.  What’s most important is that you don’t forget it all together and just assume that you’ll be covered.   

By the end of the year, you should feel comfortable with your 2023 budget and ready for the new year.  If you need any help getting your plans together, contact us!   Our team is happy to help you work through the process, so that you start 2023 confident and ready to execute on a well-considered plan for your existing custom software success.  

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