Deck 7: The IT Budgeting Process

Question 1

Budgets are a key component of corporate performance management.

Answer 1

True

Question 2

Over time, IT investments become more about creating competitive advantages for organizations and less about following organizational routine and creating legitimacy for management.

Answer 2

False

Question 3

There are significant difficulties with IT budgeting, but most IT managers feel the work involved is worthwhile and satisfying.

Answer 3

False

Question 4

In many organizations, the budget process has become slow and expensive but is still connected to business objectives.

Question 5

The concepts and practices of the corporate finance bear little similarity to how IT actually works.

Question 6

Studies have shown that organizations that rigidly adhere to the ideals of their budget process will experience a decrease in competitive advantage because of the resulting negative influence on innovation and flexibility.

Question 7

A rigid adherence to annual budget plans can stifle innovation and discourage frontline staff from taking responsibility for performance.

Question 8

Current organizational budgeting practices emerged in the 1920s as a tool for managing costs and cash flows.

Question 9

Capital expenses appear to be more carefully scrutinized than tactical expenses.

Question 10

There are few accepted general accounting principles when it comes to IT spending.

Question 11

There appears to be broad, general consensus that the IT budgeting process in many corporations is broken and needs to be fixed.

Question 12

Current IT budgeting practice approaches do little to give business leaders confidence that IT spending is both effective and efficient.

Question 13

IT is the single largest capital expenditure in all organizations.

Question 14

The budgeting process reflects and reinforces the ability of operational decision making to have an impact.

Question 15

An inefficient way to allocate strategic expenses is on the basis of which business unit will benefit from the investment.

Question 16

Budgets are a means to link the long-term goals of the organization and their short-term execution through the allocation of resources to activities, but not a means to implement IT strategy.

Question 17

The budgeting process can often undercut management's strategic intentions, causing organizations to choose between strategic investment opportunities.

Question 18

Since the budget process is inherently biased toward the short term, operational needs will systematically preempt strategic ones.

Question 19

In many organizations, IT Budgeting is a very negative process.

Question 20

All IT organizations want to capitalize as much of their spending as possible because it makes their annual costs look smaller.

Question 21

In accounting, ________ are utilized to spread large expenses over several years.

A) operating budgets.
B) capital budgets.
C) tactical budgets.
D) hardware and software budgets.
E) IT budgets.

Question 22

In many companies, ________ are decentralized into the business units and aggregated up into the overall IT budget.

A) functional IT budgets
B) fiscal IT budgets
C) strategic investments
D) capital budgets
E) operations budgets

Question 23

The IT budgeting process often:

A) is sufficient in most organizations.
B) is sufficient but consumes too much managerial time.
C) takes too long and consumes too much managerial time.
D) takes too long and consumes too much managerial and governance time.

Question 24

Fiscal IT budgets are prepared for the:

A) CEO
B) CFO
C) CIO
D) CTO
E) CIO/CTO

Question 25

________ are often not created with IT spending in mind but can significantly impact how a fiscal IT budget is created.

A) Strategic plans
B) Strategic investments
C) Corporate fiscal policies
D) Capital investments
E) Both A and D

Question 26

The operational cost of IT can be viewed as a:

A) corporate expense.
B) unit expense.
C) strategic expense.
D) IT expense.
E) Both A and B

Question 27

Which process consists of establishing IT and business unit strategies?

A) Establish corporate fiscal policy
B) Establish strategic goals
C) Set IT spending levels
D) Set functional IT budget.
E) Set the fiscal IT budget

Question 28

The strategic portion of the ________ also involves staffing the initiatives.

A) functional IT budgets
B) fiscal IT budgets
C) capital budgets
D) operations budgets

Question 29

________ are multilevel and complex and frequently occur in parallel with each other.

A) IT processes
B) Functional IT budget processes
C) IT spending levels
D) Fiscal IT budget processes
E) Both B and C

Question 30

The ________ establishes what IT expenses can be capitalized.

A) CEO
B) CFO
C) CIO
D) CTO
E) CIO/CTO

Question 31

Between 50 and 90 percent of a firm's IT budget is spent on:

A) operations costs.
B) capital costs.
C) strategic investments.
D) staffing costs.
E) application development costs.

Question 32

The part of the IT budget that includes spending on business improvement initiatives to streamline processes and cut costs is called:

A) operations costs.
B) capital costs.
C) strategic investments.
D) staffing costs.
E) application development costs.

Question 33

The part of the IT budget that is spent on technology designed to deliver new business value and achieve the enterprise's strategic objectives is called:

A) operations costs.
B) capital costs.
C) strategic investments.
D) staffing costs.
E) application development costs.

Question 34

Which of the following affects how much money an organization spends on IT?

A) Competition
B) Diversification of products and services
C) Previous year's spending
D) Both A and B
E) All the above

Question 35

Fiscal IT budgets are broken down into two major categories:

A) hardware expenses and software expenses.
B) capital expenses and operating expenses.
C) tactical expenses and operating expenses.
D) capital expenses and tactical expenses.

Question 36

________ are used by IT managers as spending plans.

A) Functional IT budgets
B) Fiscal IT budgets
C) Strategic investments
D) Capital budgets

Question 37

Budgets can affect ________ in many ways.

A) IT strategy implementation
B) competitive advantage
C) strategic investments
D) operations management

Question 38

In accounting, ________ cover the annual cost of running the business.

A) operating budgets.
B) capital budgets.
C) tactical budgets.
D) hardware and software budgets.
E) IT budget.

Question 39

Present-day annual fixed plans and budgets were established in the ________ to drive performance improvements.

A) 1920s
B) 1940s
C) 1950s
D) 1960s
E) 1970s

Question 40

Studies show that budgeting is a protracted process and consumes about ________ percent of management's time.

A) 10
B) 20
C) 30
D) 40
E) 50

Question 41

How can budget issues affect IT strategy implementation?

Question 42

Define the concept of cost allocation. Can internal IT costs be viewed as an expense to business units? Why or why not?

Question 43

How can inefficient budget allocations among business units lead to organizational inefficiencies?

Question 44

List and describe two reasons why effective IT budgeting is important for an organization.

Question 45

List and describe (3) common budgeting problems many organizations encounter.

Question 46

Is there a difference between a fiscal It budget and a functional IT budget? If so, how are they different?

Question 47

What two significant categories doe IT managers plan their annual spending?

Question 48

List and describe (3) IT budgeting practices that can make the IT budgeting process more effective.

Question 49

How can setting IT spending levels become a corporately dangerous process?

Question 50

List and describe (3) corporate activities that set the context within which IT plans and budgets are created.