Part II: How to Budget for Information Technology

Unless you have a dedicated experienced IT team with time to do more than troubleshoot employee issues, you may not have the in-house capacity or expertise to know how to go about budgeting for technology.

Like every business decision, there are tradeoffs. Do you hold on to older equipment and just pay more to maintain it, or invest in newer, more efficient technology? How do you know when it’s time to upgrade? How do you plan for technology obsolescence, given the pace of change?

As you look at your budgets for the coming year and how to determine the resources to stay competitive, here are some guidelines.

How Much Should You Spent on IT?

The answer to that question is another question: what technology is necessary for your organization to grow? Your IT budget should allocate resources according to your business goals, strategic initiatives, and market opportunities. 

To create a reliable IT budget, it’s essential to assess the business environment as well as your current IT infrastructure. Is it enabling you to compete, restraining your growth, or worse, creating security risks that put your organization in jeopardy? And how do you know?

If you have not performed an IT assessment before or it’s been more than two years, it is advisable to bring in an outside consultant, even if you have internal IT resources. A virtual CIO will have the business and technical experience across different types and sizes of organizations to help identify where resources are best spent based on your business priorities.

How Much are Other Organizations My Size Spending on IT?

CIO Magazine releases average technology spending by company size. On average, small companies spend 7-8% of revenue on IT; mid-size companies 4.1%, and larger companies, 3.2% on average, although these numbers are rising.

However, size is an isolated statistic that leaves out a multitude of factors that influence IT budgets. A law firm, industrial supplier, retailer and manufacturer have widely diverse IT requirements. Market size, competition, number of locations, and existing IT investment are all significant factors in developing an IT strategy and budget.

What Does an IT Budget Include?

If you are not sure the best way to proceed, you will save a lot of time and money consulting with a managed services provider. Companies like Summit can identify costs that you may overlook. For example, software subscription renewals, fees and licensing for cloud based applications. This includes software like your CRM system, Office 365 licenses, marketing automation and list management platforms, etc.

Other recurring expenses can include:

  • Hardware: servers, laptops, network infrastructure, desktops and devices
  • Software: support/maintenance contracts
  • Project expenses: consulting, hardware and software configuration, mobile applications, etc.
  • Staffing: internal staff, outsourced specialists, recruiting and acquisition

Then there are the big projects. Whether it’s moving to a new office or transitioning to the cloud, large companies have entire teams dedicated to implementing new systems over a series of months. If you’re lacking that amount of time or resources, rely on an IT partner to manage such a project. An IT firm can assist by:

  • Selecting the necessary hardware and software needed to complete the task
  • Tailor application development to meet your specific projects needs
  • Test hardware, software and security controls
  • Configure and integrate new technology with your current systems

Finding a trusted IT consulting firm to guide this process is ideal, as it allows for an unbiased, all-inclusive assessment, along with sound budgeting advice that’s in line with the overall business objectives. If you’re in the mid-Atlantic region of MD, DC, or Northern VA, we’re happy to answer your questions.

Paul Brophy

Paul, Summit's Network Services Operations Manager, has served organizations in the IT industry for over 18 years. He has extensive data center management experience and loves keeping up with the latest technology. He manages our Support Desk and provides CIO services for several of our clients. Paul was born and raised in Ireland before coming to the U.S. He enjoys mountain biking, tennis and is a wine and whiskey enthusiast.

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