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Our technology blogs feature IT tips and best practices for businesses in Columbia, Baltimore, Bel Air and in and about Maryland since 2002.

How Much Should My Business Spend on IT?

How Much Should My Business Spend on IT?

Before you sign any contract or make a purchasing decision, you always want to ask “What’s this going to cost, and what am I going to gain?” In fact, if you are like us, you probably want to know the costs before you even engage with a vendor. 

IT is no different, but like many services, the costs associated with IT depend on your specific situation. Every business is going to have different needs and require a slightly different approach when it comes to their technology

 Whether you are a business owner or office manager at a small business trying to establish your technology budget, or you are a CIO trying to justify expenses and drive priorities, the right perspective will be crucial.

What is an IT Budget?

Your overall IT budget needs to account for a wide range of line items, ranging from regular ongoing maintenance costs, support, expansion projects, and regular infrastructure upgrades. Technology changes over time and there will likely be major upcoming changes that your business will want to adopt and budget for within a certain time frame.

Your IT budget should also take into account things like security compliances and even mitigation costs for when something goes wrong. Face it, without a certain level of your technology, many organizations would be stuck in the dark. Your IT budget needs to keep the lights on, but also allow you to scale and adapt to an ever-changing environment.

Don’t Look at Your IT Budget as Just an Expense

With all that being said, your technology budget isn’t just a utility bill. The entire purpose of IT within your organization is to make you and your staff more effective and productive. Its sheer purpose is to be a profit-maker. Much like other investments, you tend to get what you pay for. If you don’t properly budget out important things like maintenance and upgrade cycles, your technology will underperform and will feel like it is doing less and less to actually keep your staff productive and effective.

It’s as simple as this; a good craftsman is willing to pay a premium for good quality tools, and will spend time and money keeping those tools honed and in proper working order so that they can produce the best product as effectively as possible. Your IT works exactly the same way.

What Should My IT Budget Cover?

This will change a little bit depending on your organization, but here’s a standard breakdown.

One-Time Expenses

One-time expenses are usually pretty straightforward, although they have ebbed a little over the last couple of years thanks to the chip shortage, supply chain shortages, and the pandemic in general.

Hardware Costs

One-time expenses cover your hardware, such as your computers, laptops, networking equipment, printers, phones, mobile devices, and any other physical endpoint. 

If you anticipate growth, then you will need to understand how much of a budget you will typically need to support each new employee. Keep in mind that some roles might require more expensive computing options - a video editor is going to need a premium workstation while a sales rep might just need a basic laptop and desk phone.

You should also take into consideration that older hardware should be cycled out over time. 

In general situations, a typical desktop PC should last a business 3 or 4 years, and with proper maintenance and the occasional light upgrade, it can last a couple of years beyond that. It’s good to plan regular upgrade cycles just in case, and then enjoy the perk of getting an extra year or more out of a device when you can.

Network equipment like wireless routers and access points tend to fare the same, and as technology improves over time your business can also benefit from better network performance and more up-to-date security protocols.

Servers, on the other hand, will get a slightly longer lifespan in most situations, with about a 5 to 8 year lifespan if they are kept properly maintained.

Software Implementation

Although more and more software vendors are adopting the recurring revenue model and offering software-as-a-service pricing that would fit in with your outgoing expenses, there is almost always going to be one-time costs associated with software implementation. 

Rolling out a new line of business application across your entire organization takes time, training, and troubleshooting. This can vary depending on how many users it affects, how complex it is, and a number of other parameters.

Consulting Expenses

If your internal or outsourced staff don’t have the expertise to handle certain types of projects (such as regulatory compliance work) then you will need to have some money set aside for a third party. This shouldn’t be something you have to do very often; regulatory shifts and other high-profile changes are fortunately few and far between, but it’s worth being prepared. If new laws are about to hit the books, know that there will be an eventual deadline to meet them.

Ongoing Expenses

Ongoing expenses have been common in the IT space for many years, but they are becoming more and more popular, especially for software vendors. Even many hardware vendors will offer hardware-as-a-service in some cases, essentially leasing out expensive hardware instead of selling it for a large upfront cost. Your more typical ongoing expenses will include the following:

Software Licenses and Subscriptions

This is going to cover the majority of your software. Microsoft Office, Quickbooks, Adobe Creative Cloud, antivirus, and all of the other software your business uses needs to fall under this. It’s worth noting that when you add more employees, you’ll likely need to order more licenses for some or all of the software your business uses.

This also includes things like cloud storage, email hosting, web and application hosting, third-party ecommerce systems, website licensing fees, and other ongoing services.

Internal Staffing, Recruitment, Acquisition, and Promoting

Depending on the size of your organization, it might make initial sense to have an in-house IT department. That department could consist of one or more full or part-time employees. Either way, you should make sure that your budget includes the costs associated with these employees, including expected overtime, benefits, vacation time, perks, training, bonuses, and promotions.

External Staffing, Service Contracts

This is a little more common for most smaller businesses, but even larger companies take advantage of third-party IT providers and specialists to augment their existing staff. Fortunately, if you already have contracts in place with an IT provider (especially one like Dresner Group) then this should be the easiest line item on your list, as your costs only really change with us if you start adding more users and endpoints.

Whether you are utilizing internal staff or external staff, there are several key tasks that will need to be done regularly to maintain and monitor your IT infrastructure. All workstation endpoints need to be monitored and kept up-to-date, and servers need regular maintenance and constant monitoring to prevent issues and downtime. Backups need to be checked daily and audited regularly, and if your business needs to meet certain compliance requirements, that usually involves specific audits and reviews as well.

Unexpected Support and Mitigation

It is important to have a little budget set aside for problems and emergencies. It’s a good idea to have a backup workstation or two in inventory as well, so that a critical problem doesn’t mean an employee can’t work for the day.

While mileage is going to vary, you’ll want to consider some of the types of problems you will be dealing with, starting with something fairly catastrophic. A major ransomware attack might put your business out of operation for a few days. Having the budget set aside to cover that type of hit isn’t easy, but it’s much better to have it and not have to use it than the alternative.

On top of that, there will likely be little issues throughout the year, like hard drives crashing and applications not working as intended—things that require time and support. 

How Do I Establish an IT Budget?

Fortunately, we can help. While everything we went over looks extremely complicated and expensive, Dresner Group can make it much easier to establish your IT budget so that it fits within your actual budget and helps meet your IT goals.

Remember, your IT isn’t supposed to be an expense; it’s supposed to make you more efficient and productive, or protect your valuable assets. When everything is implemented correctly, your technology can perform this effectively without breaking the bank.

Want help establishing your IT plan and budget? Give us a call today at (410) 531-6727.

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