It used to be relatively simple for people like Jeff Hapeman to list what ought to be in a technology budget: computers, printers, software, some assorted peripherals, and networking. Now, with the advent of Voice over Internet Protocol making the telephone another part of the network, and with the increasing intelligence of devices like faxes, there's not much that IT is not responsible for.
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"Two or three years ago, telephone wasn't in the budget at all," says Hapeman, chief technology officer for Clifton Gunderson, the Peoria, Ill.-based regional firm. "It made it in when we did a large AT&T contract. We had moved to a centralized data center model and a distributed wan network. We were forced to do it sooner, rather than later."
That is a view that has spread among the IT professionals in the larger firms.
"I have been trying to get people to put copiers and phone systems, anything with an on/off switch, in the IT budget," agrees Randy Johnston, a partner with K2E Enterprises, an organization that provides consulting services to accounting firms and vendors in the tax and accounting industry. He continues that is because of the need to make sure that the firm is getting the kind of technology it needs. "I don't want somebody buying a multi-function copier when I want a multi-function printer," he says.
Of course, the needs of a firm such as Clifton Gunderson, with its offices in 15 states and Washington, D.C., hardly represent the budgeting issues faced by small firms. But then, its network is so stretched across the nation's geography that it is not typical of the regional firms, either.
With four times as many offices as Plante Moran or Moss Adams, Clifton is more similar to the much larger Grant Thornton. That means that Hapeman faces more demand for technology that enables remote offices to operate together and communicate. But it doesn't alter the basic need to determine the level of spending to support operations.
Hapeman views the technology budget as having two major parts.
"There is utility spending-we have to keep the lights on. When you budget, everyone has to have a computer. People have to have bandwidth, storage, and backup. You have to have Microsoft Office. You have to have core practice applications," he notes. In terms of this kind of spending, the message to firm management is that "You will get your money back, but you have no choice."
That means defining what is basic and what is not an important part of the process. Of course, what is basic will change as technology advances. Rewritable drives, dual-monitor systems, and wireless networking were once the leading edge. Today, they are just everyday technology, which leads to what Hapeman refers to as the investment component.
It is the investment component that makes analyzing budgets difficult. A big project in one year can elevate a firm's level of spending far beyond that of comparable size organizations, if they didn't happen to have a large project during the same budget year.
For example, when the regional firms that are members of the Information Technology Alliance have compared budgets, they have been dropping out the telephony portion, says David Hirschkorn, chief technology officer for Eide Bailly, the regional accounting firm headquartered in Fargo, N.D.
Including telephony"makes it look inflated," Hirschkorn says.
Among the other projects that can cause spending to vary dramatically from year to year are paperless implementations. In these cases, Hapeman presents a separate project budget, with each project having a timeline and a calculated return on investment. "In a given year, such projects may cause you to spend more on a percentage basis, more at another firm, and the next year, you may spend less," he notes.
Moreover, those special projects get absorbed into the regular budget. After the installation is over, services such as VoIP and document management become day-to-day technology tools.
"After two or three years, they become part of the utility spending," Hapeman says.
Building from Basics
The fact that the IT department has just taken over responsibility for the voice communications budget at UHY Advisors may not be as big a change as the fact that the still-young firm is getting a handle on what it actually spends for technology.
"I have a single-page spreadsheet with 42 projects on it," says Matt Camden, CIO of Chicago-based UHY. "We were never able to do that before."
If fact, Camden says that some UHY offices had never prepared an IT budget-they just purchased what they needed. Now, the firm is finally able to talk about "Here's what I think we are going to do, not Here's what I think we did," he continues.
Camden last year got responsibility for voice communication technology, including local and long-distance, cell phones, and Voice over Internet Protocol. IT has moved toward a shared services concept and has been given responsibility for practitioner software, although contracts are still negotiated by the tax and audit leadership.
Meanwhile, IT pays the bills, allocates costs, and ensures that the firm is in compliance with its contracts. It is not responsible for consumables, such as paper, DVDs, and toner.
Because UHY is knitting together the individual firms that formed the organization, Camden still has what he views as a basic technology infrastructure, for which the firm spent about 3.5 percent of revenue last year. His goal is a world-class technology system, which he says requires spending 5 percent to 6 percent of revenue.
However, the firm has been able to hold down the spending because as it has brought its offices under one voice system, it was able to negotiate lower prices with AT&T. In some cases, the cost per unit dropped by 45 percent, Camden says.
The hodgepodge of different email systems, voice service providers, and networks that came with each of the firms that formed UHY is one reason Camden is just getting a true picture of spending.
Voice, in fact, had not been any one person's responsibility-remote offices purchased their own services.
"It was seen as a general administrative cost, like rent and furniture," says Camden. Not only was there no central voice technology budget, in most cases the people making the buying decisions were office controllers, who are generally not voice experts. That meant when there were decisions to be made, such as replacing an office PBX, the firm had to take the more expensive role of hiring outside consultants.
Training and Support
Perhaps the most difficult component of technology spending to calculate, or perhaps it's simply ignored, is training, and the related topic of support.
"We see more firms lacking enough IT support for endusers," says Gary Boomer of Boomer Consulting, who believes that spending enough on training and on technical support can make a huge difference in firm profitability.
Training and support are also driven by basic business needs. If a firm wants to provide support for 18 hours a day to everyone in every office," there's a fairly narrow window that you can expect to spend," says Hapeman. He notes that the firm must make the decision of what it needs because "I can provide tremendous support and give the firm a person who stands behind every partner. It's great support, but it's not very cost effective."
However, training isn't necessarily an uncontrolled beast, when it comes to the demand for dollars. Camden notes at UHY, training costs for applications have been stable because the firm has not purchased a lot of new software recently.
The firm provides user training for specific applications and training for certifications, and a lot of "train the trainer," he says. However, "the user and practice management applications haven't changed. There aren't a lot of new things that everyone needs to learn.
So what's the best way for firms to measure their technology spending, in order to determine if they are spending the right amount on the right things?
Describing technology spending as a percentage of revenue has been a standard measurement. Another is the cost of technology per employee, a favorite metric of research firms such as Gartner.
"The COOs and CFOs want to latch onto something simple to work with-percentage of budget is easy to use," says Hapeman. And while many firms are moving toward spending per individuals, both have shortcomings comparing spending with organizations of the same size and type.
"Not everybody is responsible for the same thing. If you move to VoIP, voice is now part of your IT budget. If you compare to a firm that doesn't have VoIP, comparing on a dollar or head count basis can be very difficult to do," he continues.