New research shows that IT is making some big blunders when it comes to budgeting. Here’s a little test to see how your organization is faring.

Dial your IT chief’s extension and ask him or her for your company’s annual spending levels on a few of these tech “biggies”:

• e-mail
• desktop systems, and
• your ERP system.

And give ’em 24 hours to get you an answer.

Most won’t be able to do it. In fact, 62% of CIOs admitted they were “not at all confident” or merely “somewhat confident” their departments could provide an accurate answer in that time frame.

That’s according to a new survey of CIOs by tech solutions firm Apptio.

Some of the other alarming findings:
•    IT often has no system to track or allocate costs
•    There’s zero transparency in the budgeting breakdown of tech costs
•    IT performs only an annual calculation of the total cost of ownership, and
•    Senior managers barely understand the cost per IT service.

The consequences of these shortcomings last much longer than budgeting time: Just 14% of CIOs feel they’re very well equipped to make accurate cost-based or ROI-based decisions year-round.

So what’s a cost-conscious company to do? There are some best practices that can increase understanding of where
those tech dollars go – and whether or not they’re going to the most profitable pursuits:

1. Put more Finance in IT. A mere 12% of IT costs are billed back based on accounting principles like activity-based costing or consumption-based allocation. And more than half of IT departments have no regular financial reporting process. No company can afford to have a department with as many dollars at its disposal as IT lack these accounting staples.

2. Press for frequent updates. Once IT’s doing a better job of tracking the annual cost to deliver and maintain each IT service, it’s time to go a step further. Be certain IT is updating the total cost of ownership frequently. Ideal: monthly, though only 12% of your peers do this now.

3. Open the dialogue. This isn’t strictly an issue between Finance and IT. You need other managers involved, too. And IT has some very specific ideas on how they want to get into that conversation: They suggest showing managers the cost and usage (frequency or volume of use) of each IT service as a valuable way to discuss the demand for those services.

For more on the survey “Market Intelligence Report: CIO Survey on Total Cost of Ownership and Return on Investment for IT Projects,” go to www.apptio.com