One of the biggest mysteries in IT is how much is actually spent on services, software, hardware, and networking. Where do you begin when you are budgeting for IT? Do you set aside funds and then work within the parameters, or do you determine your needs and build a budget around that? Should the IT budget be a percentage of revenue? What is part of the IT  budget? This article is about how to build a technology budget and what to consider when you are doing your IT budget to ensure that you and your employees have the tools to do the job and and don't break the bank.

Evaluating your business' IT infrastructure and needs.

The first step towards IT budgeting is to take an inventory of the business's current and future IT needs and wants. The best place to start is with a self technology audit. Small businesses can do this by lumping employees that perform similar tasks into groups.  If there are more than 5 employees in the business, break out the grouped employees into segments. Determine what IT requirements each employee needs to do their job. 

More and more products and services have moved to a per-user billing basis. It does not make sense to pay a lump sum for all the employees to use a service that only a few employees need. The computer user in shipping will have different requirements than the computer user in finance. Paying a lump fee for all the employees to have the same service is a one size fits all faux pas that results in over spending. By giving employees the functionality they need to do their job, results in a more efficient use of resources and decreases IT expenditures. This is especially true if you are using cloud services, or apps.

Once you have an idea of the services and technology you need, it is time to start comparison shopping. Browsing the technology market place gives you an idea and feel for what is out there and what is reasonable. You do not have to buy or commit at this stage of the game, the objective is to figure our what is realistic and doable for your business. Taking  the time to go through quotes and presentations is enlightening and you will learn how to reduce overspending.

Here's an interesting fact for local Mississauga business... Mississauga and the surrounding areas have their internet service through Bell and Rogers. There are many vendors that resell the Bell and Rogers services as their own brand. When you find one that resells internet service at a cheaper rate and call into Bell or Rogers, Bell or Rogers will price match, so you can avoid the hassle and hardship of switching ISPs. All these minor tweaks and reviewing your IT infrastructure optimizes and refines your IT Budget.

Projection and Allocation of the IT Budget

So now that you have self educated with quotes and presentations, you should have an idea of what reasonable IT costs are and build out your ideal IT department and infrastructure.  A study from Gartner in May of 2013 reported that the average IT spend for companies should be about 5% of your yearly revenue. A rule of thumb is to always over budget on flexible IT service costs such as back up services, service plans, and un expected emergencies, and to  under budget on equipment and technology that can be upgraded or enhanced such as workstations, printers, etc.

There will always be budget pressures. Spending 5% of your yearly revenue is not a concrete number either but it is a safe starting point. It may seem like a large dollar amount of when you do the math, however this amount does go down once your IT cost optimization exercise is complete. The majority of business' have the potential to reduce their IT costs by 25%. 

(function(){
var s='hubspotutk',r,c=((r=new RegExp('(^|; )'+s+'=([^;]*)').exec(document.cookie))?r[2]:''),w=window;w[s]=w[s]||c,
hsjs=document.createElement("script"),el=document.getElementById("hs-cta-e7c1478f-07c5-4638-9eb9-b3dd0ae8ace4");
hsjs.type = "text/javascript";hsjs.async = true;
hsjs.src = "//cta-service-cms2.hubspot.com/cs/loader.js?pg=e7c1478f-07c5-4638-9eb9-b3dd0ae8ace4&pid=245212&hsutk=" + encodeURIComponent(c);
(document.getElementsByTagName("head")[0]||document.getElementsByTagName("body")[0]).appendChild(hsjs);
try{el.style.visibility="hidden";}catch(err){}
setTimeout(function() {try{el.style.visibility="visible";}catch(err){}}, 2500);
})();

(function(){
var s='hubspotutk',r,c=((r=new RegExp('(^|; )'+s+'=([^;]*)').exec(document.cookie))?r[2]:''),w=window;w[s]=w[s]||c,
hsjs=document.createElement("script"),el=document.getElementById("hs-cta-e5fd356d-760b-4a6e-91d8-bf75c762d6af");
hsjs.type = "text/javascript";hsjs.async = true;
hsjs.src = "//cta-service-cms2.hubspot.com/cs/loader.js?pg=e5fd356d-760b-4a6e-91d8-bf75c762d6af&pid=245212&hsutk=" + encodeURIComponent(c);
(document.getElementsByTagName("head")[0]||document.getElementsByTagName("body")[0]).appendChild(hsjs);
try{el.style.visibility="hidden";}catch(err){}
setTimeout(function() {try{el.style.visibility="visible";}catch(err){}}, 2500);
})();