Cutting your business IT budget might save money in the short term, but it could jeopardize your long-term position in the market. Why? In our digital age, every company is increasingly reliant on technology to remain relevant, efficient, and resilient to shifts in the global economy.
Knowing what other businesses are doing provides a benchmark for boosting your business IT budget. This budget should be used to improve key factors, such as upgrades, cloud services, and aligning your spending with your overall strategy. By partnering with TenHats, you can maintain a competitive advantage in your industry.
Benchmarks for Increasing Your Business IT Budget
Increasing your IT budget depends on how exactly you’re counting it. For example, do you include personnel and recruitment or not? While many advisors still say the recommended benchmarks are 3-5% of your total operating budget, we’re commonly seeing companies set aside 10%+ of their median annual revenue for IT expenditures.
Normal benchmarks for your business IT budget vary depending on factors such as:
- Industry
- Company size
- Technology requirements
Industry plays an important role in how much your organization’s IT budget is. For example, financial services tend to spend around 10% of their annual revenue budget on IT while healthcare averages around 5% and industrial manufacturers around 2%.
Company size can also be important. Those with 2,001 to 5,000 employees spend a median of 10% of their revenue on IT while larger businesses spend around 8%. Companies with 10,000+ employees, on the other hand, only spend around 6% of their revenue on IT.
Technology requirements help determine where funds for your IT budget need to go. This allocation typically covers:
- Hardware
- Software
- Maintenance
- Personnel costs
Ultimately, benchmarks should be tailored to your organization’s strategic objectives and technological needs.
Where the Money Goes When IT Budgeting
When your organization budgets for IT, you should consider several factors. This helps to ensure efficient operations, competitiveness, and security.
Increasing your budget means that your organization gets more of its IT needs met, including:
- Upgrades
- Cybersecurity
- Cloud services and hosting
- Software and programs
- Talent-sourcing and upskilling
- Aligning your budget with your overall strategy
Upgrades
IT equipment upgrades are vital to maintain your organization’s technological relevance and efficiency. When configuring your business IT budget, you should accommodate hardware and software upgrades to prevent obsolescence and enhance productivity. It’s crucial to assess the lifecycle of existing systems and plan for replacements or updates accordingly.
Cybersecurity
Cybersecurity is paramount in today’s digital landscape. Allocating resources for robust cybersecurity measures helps protect sensitive data, systems, and customer trust.
To mitigate cyberthreats effectively, budgeting should encompass investments in:
- Firewalls
- Encryption tools
- Threat detection systems
- Employee training
- Incident response plans
Cloud Services and Hosting
Cloud services and hosting offer scalability, flexibility, and cost-efficiency. When budgeting, be sure to evaluate your business’s cloud needs by considering factors such as:
- Storage
- Computing power
- Data transfer
Costs associated with PaaS and other cloud services should be forecasted accurately. This helps to avoid unexpected expenses and optimize your resource utilization.
Software and Programs
From accounting to customer relationship management, software and programs play pivotal roles in your business operations across various functions. This includes budgeting for:
- Software licenses
- Subscriptions
- Updates
Considering software and programs in your business IT budget is essential. It helps ensure access to essential tools for efficient workflow management, communication, and collaboration.
Talent-Sourcing and Upskilling
While not traditionally part of the IT budget, talent sourcing or upskilling is increasingly important. Skilled IT professionals are essential for maintaining infrastructure, implementing new technologies, and ensuring cybersecurity.
Take time to budget for:
- Recruitment
- Employee skills assessments
- Training
- Professional development programs
This enables your business to attract, retain, and cultivate IT talent, fostering innovation and competitiveness.
Aligning Your Budget with Your Overall Strategy
Furthermore, aligning IT budgeting with strategic objectives is essential for prioritizing investments that drive business growth and innovation. Collaboration between IT and other departments can help identify technology needs that support organizational goals, ensuring that budget allocations are strategic and impactful.
How Higher IT Costs Help You Maintain a Competitive Advantage
Maintaining a competitive advantage with IT is becoming increasingly costly for several reasons. To start, capital spending on IT infrastructure and equipment is essential for improving productivity and profitability. This includes faster computers and upgraded Internet of Things (IoT) devices for manufacturing.
However, staying ahead in the market requires ongoing investment. This means that the continual need for technological advancements and updates will increase costs over time.
Cybersecurity threats are another key factor that is always evolving and becoming more sophisticated. This means that they pose more significant risks to businesses.
Failure to adequately prepare for cyberattacks can lead to:
- Potential data breaches
- Financial losses
- Reputational damage
It’s essential to invest in robust cybersecurity measures. This includes advanced threat detection systems and employee training, which can require substantial resources.
A failure we often see is not integrating IT into the overall business strategy. By aligning your IT with your overall business goals, you can avoid this major leadership mistake and ensure that your business IT budget investments support organizational goals and contribute to long-term growth and competitiveness.
Partner with TenHats to Get the Most Out of Your IT Budget
Implementing technology strategically involves careful planning, investment in research and development, and continuous adaptation to changing market dynamics. That’s a lot of ground to cover, which is why you need a partner to guide your company through the world of IT.
At TenHats, we’ve been providing IT business strategies and services to East Tennessee and the surrounding areas since 2016. Along with strategic services, we also own and operate our own data center—the region’s first carrier-neutral option in 20 years. With our services and know-how, you’ll get more out of your IT business budget than ever before.
Are you ready to get the most out of your information technology budget? Talk to an IT strategy expert today!
Understanding industry standards serves as a reference point for expanding your company’s IT budget. Allocate these funds to enhance critical areas like upgrades, cloud services, and strategic alignment between your IT and overall business goals. Collaborating with TenHats helps sustain your competitive edge within your sector and get the most from your budget.
