Budgeting

Solution Overview

There are the following phases of a budgeting process, which are covered by Budgeting solution in Apptio Targetprocess:

• Budget Target - describes the company's initial idea of distributing funds across Portfolios and defining guardrails (Run vs Grow, CapEx vs OpEx).
• Budget Proposal - describes budgets proposed by Project Managers or Portfolio Epic Owners based on the funds needed.
• Budget Approval - comparing the numbers in a Budget Target and Budget Proposal reflects the final decision on the investment into each Portfolio.
• Actuals - shares information about labor and non-labor expenses related to a Portfolio.

Budgeting solution allows you to fund People (Value Streams, Solution Trains, Agile Release Trains or Teams), Products or Work (Portfolio Epics (Projects)) annually or by a custom period (for example by Planning Interval), calculate Proposed Budget and/or see Actual Costs and Expenses for any of them.

Note: The mentioned on the diagram entities should be non-global for the solution to work. If you already use Product, Value Stream, Solution Train or Agile Release Train, which are global, please contact us for further assistance.

Solution Flow

During the solution installation you'll need to decide which entities you'd like to do Budgeting for: People (Value Streams, Solution Trains, Agile Release Trains and/or Teams), Work (Portfolio Epics, i.e. Projects), or/and Products (Products), as well as what levels of People, Work or Products you'd like to track Proposed Budget and Actuals. The solution supports any combination of them. 

For example, you can fund Value Streams from Portfolio and able see the Proposed Budget and Actuals for the other (Work or Product) hierarchies.

Or you can fund Portfolio Epics from Portfolio and see the Proposed Budget and Actuals for the other (People or Product) hierarchies.

Also you can fund Products from Portfolio and see the Proposed Budget and Actuals for the other (People or Work) hierarchies.

You'll see Budgeting: Structure folder in the left menu. By default, the solution will generate Budgets only for the current Year/Period. In case you'd like to generate Budgets for more Years/Periods, simply click Generate Budgets on the Budget Generation view.

Note 1: If you need to generate Budgets for many entities and many Years/Periods, please uninstall Budgeting: Metrics solution component, generate Budgets and then install it again to speed up the calculations.

Note 2: Do not click "Generate Budgets" simultaneously for two or more Years/Periods. Please wait until budgets are generated for one selected year and then click "Generate Budgets" for the following year.

Note 3: When somebody creates a new entity (Portfolio, Portfolio Epic, Product, etc.), Budgets will be created automatically for the current Year/Period and future Years/Periods for which Budgets have already been generated.

Note 4: The levels you'd like to enable the Budgeting solution are configurable. Please contact us if you'd like to implement it for different work entity types.

Note 5: If you don't see Budgets on the views, please make sure Budgeting Portfolio is selected in the filters:

Solution Flow

When the solution is installed you can go through the Budgeting flow. Here is an example of Funding Portfolio Epics (Projects) on annual basis flow. You can see more examples in Budgeting: 'Entity Type' Funding Views components of the solution.

Step 1: Set Budget Targets

Budget Target describes the company's initial idea of distributing funds across Portfolios and further between Portfolio Epics. It's done based on the company vision and strategy for the following year's top-down. It answers the following questions:

• How much do we plan to invest in each Portfolio?
• How will this be distributed across Portfolio Epics?

Portfolio Owners usually perform budget targeting. Their main goal is to split the Target Budget across different Portfolios, define guardrails, and set what percentage of capitalization should be headed to, as well as the grow and run targets.

Portfolio Owners will handle planning on the Budget Targets dashboard, where you enter a Target Budget for a Portfolio and then for each Portfolio Epic.

Target CapEx and Opex (Percentage) define desired capitalizable and non-capitalizable expenses. Target Grow and Run (Percentage) – desired Run vs Grow expenses percentage on a Portfolio and each Portfolio Epic (Project). 

Target Budget In Scope for Portfolio is a sum of Portfolio Epic (Project) Target Budgets. It's used to see if we distributed the total Portfolio Budgets properly and didn't over or under-plan it. It will be highlighted in red if the sum of Portfolio Epic Target Budgets will be more than a Portfolio Target Budget, meaning we have planned to distribute more funds than available.

You can also enter the numbers on a Portfolio Annual Budget detailed view -> Budgeting tab:

Portfolio Epic Owners will see and can update the information about Target Budget of a specific Portfolio Epic on a Portfolio Epic Annual Budget view.

Step 2: Budget Proposal

Budget Proposal is provided by Portfolio Epic Owners or Project Managers and includes information on how much funds are needed to implement a Portfolio Epic in the upcoming Year.

 It answers the following questions:

• What resources are needed to implement a Portfolio Epic?
• What are the forecasted funds for Labor Costs and necessary Non-Labor Expenses?

There can be different ways of calculating a Proposed Budget for a Portfolio Epic: based on User and Team Work Allocation, Headcount, Portfolio Epic estimates, or other parameters (using additional solutions), or manually entered in this solution if the numbers come from another system or are approximately guessed by Portfolio Epic Owners.

The Proposed Budget consists of a Proposed Labor Budget and a Proposed Non-Labor Budget (defines expected non-labor expenses, such as Software, Hardware, etc.).

Budget Proposal - Labor

The Proposed Labor Budget usually reflects how much money is needed for labor expenses. Here you can use one of the following solutions for budgeting on annual basis:

• Proposed Budget based on Work Allocations (42443633-10b5-4f5e-8a80-92803f2a49d6), where Project Managers would create User, Team and/or ARTs Work Allocations, defining the needed people for a project, desired period and percentage.
• Proposed Budget based on Headcount (57c0231e-d579-4c43-8d7a-6729cf99dc21), where Project Managers would define the needed annual Headcount (number of people of required Job Profiles and Locations), and Forecasted Cost will be calculated based on Blended Rates.

Calculated Costs will be distributed across Portfolio Epic Monthly Budgets and roll up to Quarterly and Annual Budgets. Thus, we'll see the Proposed Labor Budget on a Portfolio Epic Annual Budget.

And for funding by custom period, you can use the following solution:

• Lean Budgeting: Proposed Budget based on Work Allocations (119122bc-501d-4fe3-92ea-8c1778a4be76)

Portfolio Epic Owners would create ARTs Work Allocations, providing estimate by ART in points and Percentage (Negotiated Capacity) of ART to work on this Portfolio Epic. Using ART Cost per Point the system will calculate how long it will take and how much it will cost.

Calculated Costs will be distributed across Portfolio Epic Period Budgets and roll up to Budgets. Thus, we'll see the Proposed Labor Budget on a Portfolio Epic Period Budget. 

Budget Proposal - Non-Labor

The Proposed Non Labor Budget will be formed based on the Expenses Proposed amount. First, you'll create the estimated Non-Labor Expenses, defining the needed amount. The Expenses will be connected to the respective Month, Quarter and Year and be shown as a total Annual Proposed Non-Labor Budget.

Step 3: Budget Approval

Comparing Target Budget and Proposed Budget for each Portfolio on a Budget Approval dashboard, Portfolio Owners decide if they will go with the initial Target Budget or increase/decrease and distribute it differently across Portfolios. 

Further, the budget is distributed across Portfolio Epics. In the Approved Labor Delta and Approved Non-Labor Delta fields, you can see the difference between a budget approved for the Portfolio and the total budget approved for Portfolio Epics in the Portfolio so that you know you approved the correct total budget across Portfolio Epics.

There can be a situation where a Portfolio Epics Proposed Budget is much higher than a Portfolio Target Budget. Portfolio Owner needs to decide whether we will go with the suggested scope and increase a Portfolio Budget or decrease the scope by removing some Portfolio Epics.

On the same dashboard, you can also check whether Target Portfolio Guardrails match the planned Portfolio Epics CapEx/OpEx and Run/Grow parameters.

Step 4: Actuals

Costs represent Labor Costs. They can be calculated based on spent Hours and people rates, imported from a different financial system or entered manually. The Costs will be split into CapEx/OpEx, and Run/Grow to see aggregated by each category for a Portfolio Epic and a Portfolio.

Expenses represent Non-Labor Expenses. You'll enter Actuals, which will also be split by the above categories.

The total Actuals will be aggregated for each Portfolio Epic and a Portfolio by Month, Quarter, and Year and can be viewed on the Actuals dashboard. Here you can focus on a specific Year, Portfolio or select a Portfolio Epic to focus on the details.