Budget Planning for 2019: How Much Should You Spend on IT?

Every year, the role of technology in business is expanding. Massive leaps in technology and increasing affordability have made technology the heart of most modern businesses. Whether considering CRM software to manage leads and deliver service, point of sale systems, or data backup systems, it is likely that the technology you use is critical to your daily tasks and your future growth.

The increased reliance on technology means that even the smallest organizations need to create a dedicated IT budget. The problem for many is determining how much to spend. Every business is different, so it’s not as simple as throwing out some ballpark figures.

Instead, you’ll need to determine the role that IT plays in your business, and plan accordingly.

Typical Components of an IT Budget

The money that businesses spend on IT can be broken down into the following main categories.

  • Hardware expenditure for workstations, laptops, cell phones, servers, networking equipment, and software.
  • Data services for internet, telephony etc.
  • IT support, including consulting, software development and support, training, deployment, repairs and maintenance, data centers etc.
  • Cloud technologies including software and storage/backup solutions are increasingly becoming a part of modern IT budgets.

The Average Percentage of Total Revenue Spent on IT

The average business spends 4-6% of total revenue on IT. Small businesses spend the most, with the figure gradually declining as companies grow larger. IT spending is unique, because efficient IT systems and support can scale well, without the need for massive reinvestment.

How to Determine Your Unique Needs

Every business is unique in the way that it uses technology. Your needs will directly correlate to how much of a role IT plays in your business. If your company is not technology focused and simply uses workstations and some essential software, then your IT costs could be relatively low. If technology is core to your service delivery, then your IT spend may be higher than the global average.

The first step is to take inventory of your hardware. The number of devices used in your company can give you an idea of how much you would need to spend on support and replacements. Analyzing previous expenditure could allow you to gain an understanding of how much you spend on hardware procurement and support.

Software used in your business should be fully evaluated to understand how it aids in business function, and how much you are spending on it. Software is one area where modern businesses often spend too much. Outdated solutions may be more expensive than today’s cloud solutions. It’s important to consider IT support costs as well as your software licensing expenditure.

Network services, data connections, and hardware spending on routers, switches, servers etc. will all fall within your IT budget. If your technology is evolving, then your network may no longer be suitable for the demands of your business. Faster data services and upgraded local networks may need to be factored into your IT budget for 2019.

Security should be a major component of your IT budget. Antivirus solutions, network security hardware, and consulting services are becoming increasingly important as data security threats become more sophisticated each year. A major data breach or malware infection could be catastrophic for your business.

Consider whether your business could implement some form of BYOD (Bring Your Own Device). This would require new security practices but could reduce your hardware expenditure. If you are using secure cloud software solutions, then it may be feasible to allow staff to use their own devices for some business functions.

Depending on your business, you may spend above or below the average of 4-6% of total revenue.

Managed IT Consulting Can Help with Efficient IT Budget Planning for 2019

Your IT budget should be considered an investment rather than an expense. Technology facilitates business, and spending wisely on software, hardware, and IT support could allow your company to improve service delivery and grow revenue. Investing in more efficient solutions may increase your initial budget in 2019, but this could be offset by the reduced maintenance cost and potential business growth in the future.

Understanding precisely how much you should allocate for your IT budget can be difficult, particularly if you are not technology-focused. With the help of a managed IT service, you could cover all your IT needs while also receiving IT budget consultation.

Expert advice will allow you to develop the most efficient and flexible 2019 IT budget that keeps your business running, while also providing the opportunity to increase efficiency and gradually reduce your spending in some areas.

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