2 posts tagged with "budgeting"

You open the Q3 Plan-vs-Actual report. Planned engineering spend: $1.8M. Actual: $2.34M. Variance: +30%. The CFO wants to know why by Friday.

The textbook answer says "investigate any line where |actual − plan| > 10%". That's where most engineering variance reviews stop, and where they go wrong. A 30% gap on engineering cost has at least 5 distinct causes. Each one leaves a different signature in the data. If you don't decompose the variance, you end up firing the project manager when the real culprit was a retroactive raise round in August.

CIMA's variance analysis framework treats variance as a tree: rate variance × volume variance × mix variance. Engineering cost is messier, because labor isn't a uniform commodity. Below is the version that actually fits how dev teams burn money.

It's budget season. The CTO submits an engineering budget request: $8.2M for next year, up 18% from this year. The CFO asks for justification. The CTO points to headcount growth, salary inflation, and a list of planned projects. The CFO pushes back: "Can we do it for $7M?" The CTO says no. They compromise at $7.5M.

Neither number is based on data. The CTO added a buffer to last year's spend. The CFO cut it by a round number. The compromise has no analytical basis. Both sides walk away slightly unhappy. A Deloitte CFO Survey found that technology spending is consistently one of the hardest budget categories for finance teams to evaluate — largely because the inputs are opaque.

This is how most IT budgets are built. It doesn't have to be.