digital transformation

Budgeting smart when implementing digital transformation

Digital transformation is the first step taken by companies when they want to integrate digital technologies into all spheres of their business. As we are living in a digital economy, businesses are facing the urgent need to be more relevant with changing customer needs and preferences, while others are trying to remain competitive, and also looking at opportunities to expand into new markets. When it comes to implementing a holistic digitisation project, organizations must take certain points factored in when working on the most primary step to digital transformation.

It’s budgeting. It’s a completely operational and cultural change aimed to deliver the best to the customer by leveraging trending digital technology.

Consider opinions of inside stakeholders

Traditionally, companies take budgeting decisions on a departmental basis, with the financial director approving a high-level budget, which is then distributed across the team. This process does not involve everyone from across the organization, as it was never required. This usual approach might require a little alteration, when it comes to budgeting for digital transformation, as these models simply aren’t viable today. Digitisation of an entire organization would be affecting each and every area of business. If digitisation will come into the sales and marketing department, then it shall also come into the HR, finance, operations, to even to the facility management department. Hence, to understand how digitisation will impact all these areas, it is important to have participation of the people involved in each process. It calls for a collaborative approach that facilitates a thorough understanding of core business processes. Without a holistic overview, there are risks of creating bottlenecks that will affect the investment down and away from the revenue-gene activities that matter.

Flexible Budgeting Model

Unlike how budget plans were designed traditionally, digital transformation budgets cannot be strictly limited. As most of the digital tools and solutions will be newly acquainted with, the budget may at times need to accommodate unforeseen needs and issues. Hence, it is advisable to have a buffer amount to the budget. In flagship budgets it is a smart move to consider contingencies. Thus, instead of having just a long-term budget, a short-term budget and goals along with it is more advisable. With short-term goals, the digital transformation process and results are monitored better and modification to the budget allocation can be done timely to reduce wastage and improve returns. In the absence of short-term goals, any failures are realized at a much later stage and it becomes costlier to correct the errors.

Consider data migration costs

While planning a budget for digital transformation one critical component is often ignored, that is data migration costs. When the business undergoes digital transformation, all the data needs to be migrated from the existing set-up to the new system. This is a costly affair, as it must be assured that there is no loss of data in the process, hence all care to be taken. Thus, there must be a sufficient budget for compliance and security requirements, as these important factors must be considered in digital transformation planning. It’s also important to assess the non-financial costs, time taken for migration, additional work burden on employees during migration and risks associated with data loss as well.

It is always advisable that businesses take consultancy from industry experts in each step. This can help eliminate many common risk factors and make the process smooth. Hence consultancy costs must be factored into the budgeting as well.

Allocating Workforce Training Budget

Digital transformation would require additional training of the staff, without which it is a complete futile initiative. For optimal utility of the digital tools, the workforce must be well versed with the tools. Training may require outsourcing separate software training agencies or authorized trainers for certain software’s. Some training may go up to a high cost than others. Thus, this is one area that will require coming under the budgeting head.

Plan for the Risk

Every change in a legacy process can trigger certain possibilities. These can be either positive or negative. It is rather an intelligent step to consider any kind form of outcome and be prepared for it with prior plans. Digital transformation is a major change in any company, which may have certain impacts. The goal of digital transformation is to create new markets. This process can even bring negative results. Companies must analyse this on time. In short, the digital transformation of a business is a risk, but if planned well and prompt action taken, the results can be desirable ones. Keeping enough backup funds ready for unexpected budget issues is a smart move here.


Planning and budgeting for digital transformation is a complex and layered process. For any business, digital transformation creates a new path for success, but it has risks. To achieve heights, it is imperative to take this risk. Diligent efforts on budget planning can help reduce the negative impacts of digital transformation to the business.

By Rajendra Chitale, CFO, Crayon Software Experts India

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