What Is Your IT Budget This Year?

I don't really expect an answer to that question. It is more of question to ask your self.

For some the answer is "as little as possible" for others it is "what ever I need to meet my business goals." The right answer is somewhere in between.


There are a variety of ways to determine the right IT budget for your business. Let's first talk about the components of an IT budget. At a very basic level it may look like this:

A complete budget will included maintenance of your existing systems, both hardware and software. I break out security and back up as a separate item because it is so important. You should have provisions for improving your existing systems or adding new. Most items could be handled by internal staff or outsourced. Some initiatives are best accomplished by engaging a consulting firm to handle specific projects.

This budget can be broken down into great detail but this is a good place to start.

The numbers you assign really depend on the nature and state of your business. You can use general guidelines for your industry but depending on factors like whether your business is in growth mode or fending off declining sales those guidlines may not really apply. Within a general business sector like Business Professional Services, IT spending can vary from 2% to 18% of gross revenue with a mean around 8%. But using these benchmarks as a basis for IT spending can be dangerous.

A better basis is building your budget on a well thought out technology plan or roadmap. Then a combination of qualified competitive bid for those components of your budget that can be clearly defined and quantified such as maintenance of existing hardware and software; and clearly detailed fixed price contracts on upgrade and additions projects can yield the best results.

The value of upgrades and additions can be difficult to quantify in terms of ROI. We look for results like increased sales, reduced operating expense, increased customer retention or reduced labor costs. But it is often tricky to nail this down. Sometimes you just have to go on faith. The thing is that not engaging in improvement of your technology is a sure path to business decline.

An area of IT spending that is often neglected is training. You can invest in the best hardware and software in the world and never realize your goals by not allocating enough resources to training your people. I can't emphasize this enough.

The bottom line is that a good IT budget is an important part of your business success and it requires a lot of thought and planning. The benefits can be tremendous as are the potential for loss, so it is clearly worth the effort. We think that engaging a professional to help you develop your IT budget is a very good idea.

Peter Conway
pconway@netatwork.com
212-997-5200 ext 4333