Information technology (IT) is crucial in a company’s desire to grow, enhance productivity and gain a competitive edge. To achieve these goals, you should consider IT budgeting.
Budgeting can be frustrating and difficult, and asking for money is always hard, especially since most companies want to cut costs wherever possible. The ever-changing IT landscape, including cloud migration, remote working and cybersecurity compliance, can further complicate budgeting.
What is IT Budgeting?
IT budgeting is the process of allocating funds from C-level executives to the IT department for IT-related services, projects and equipment, and it’s a critical part of any company’s financial strategy. The funds can cover a range of recurring expenses like software leases, disaster recovery plans and staffing to one-time costs for new technology and maintenance.
IT budgets highlight anticipated costs for the year, specifically prioritized initiatives, and it provides a holistic view of the IT department and its funding requirements to help the company stay on track and run smoothly. Once your company determines what initiatives and strategies are needed to move the business forward and maintain its essential operations, you need to figure out how you're going to pay for them.
This is a great time to reveal any inefficiencies or vulnerabilities in your IT infrastructure, including unreliable and slow networks, ineffective cybersecurity compliance against cyber attacks or bad teamwork and communication. If your company faces reoccurring IT problems, you could consider hiring a managed IT provider.
By budgeting, you can track and control your spending; see where you can save money while ensuring you make the most use of the funds you receive. You should look at your entire technology spend and ensure your company isn't funding technology or software that it doesn't need or use anymore, especially since applications and tools change all the time.
An IT budget can actually save you money down the long road – you are assured a set amount for the year, so you’re not as likely to blow it on the spot, and you won't spend it on useless tools. If you have confidence in your IT budget and plan, you're less likely to spend money that you otherwise didn't plan on spending.
Keep in mind that if the company is struggling financially, it might not be the best time to ask for a bunch of new equipment or employees. Also, make sure that what you do cut won’t negatively impact your overall strategy.
Parts of an IT Budget
Several components make up an IT budget, including:
- Hardware: purchasing or leasing servers, computers, printers, storage devices, laptops, phones, tablets, routers and networking equipment. This also entails upgrades and replacements.
- Software: licenses and subscriptions to software applications, like Microsoft 365, operating systems, security software and productivity tools, like Microsoft Teams. Like hardware, this includes upgrades and replacements, as well as troubleshooting or fixing bugs.
- Staff: salaries, benefits, raises, incentives, recruitment and talent acquisition, hiring and onboarding, ongoing training and third-party contractors.
- Maintenance: keeping the infrastructure up-to-date involves improvements and preventative maintenance, including repairs, upgrades and patches.
- Productivity initiatives: IT initiatives that help your people do more with less and you business scale more easily.
- Overhead: data centers, server rooms, power, HVAC and network connectivity.
- Unexpected costs: defending against cyber attacks or undergoing emergency repairs.
Best Practices When Creating an IT Budget
We all hate making budgets, but putting the appropriate time and diligence into creating an IT budget is worth it – if you blow it off or do a shoddy job, it could negatively impact your IT budget or even the overall company.
- Use last year’s budget as a starting point and guide. Compare your yearly spending to see if you have allocated funds more effectively. The more closely you map your new budget to last year’s, the easier it is for you to justify funds. For an extra kick, you could compare it with your competitors.
- Identify your primary objectives and goals based on “must have,” “could use” and “would be nice.” This helps you focus on what you can realistically accomplish in the year and that your funds can match those priorities, as well as reduce or remove items that can wait. When creating an IT budget, have a list of ongoing or recurring costs so you can set aside the appropriate amount for them. Try not to under or overestimate the amount of funds you need.
- Do plenty of research so you don’t buy tools or software you don’t need. You should also adjust your budget based on trends and new technologies, both long-term and short-term. If you’re constantly planning for the short term, all you’ll accomplish is replacing equipment every few months, which can be expensive. Long-term tools can account for scalability, changes and trends.
- Communicate as much as possible. If you have any major projects or changes you want to implement, inform stakeholders beforehand so they aren’t blindsided when they receive the budget. You could also talk to your team and gauge what they need (new hardware, training, another co-worker.). Open communication keeps everyone on the same page, so they all know the IT department’s goals.
Thriveon and IT Budgeting
IT budgeting is a powerful strategic tool that can help your company drive and achieve its IT priorities and goals laid out by its IT strategies and roadmaps. These initiatives can deliver value and impact to the company, no matter if it’s productivity, additional clients or higher revenue.
AtThriveon, we offer our clients multi-year roadmaps, strategies and budgets so you can usher in a new era of efficiency while achieving your business goals. Don’t wait –schedule a meeting with us today.