It’s critical to budget realistically for you annual IT expenses including regular maintenance, system replacement expenses, license and warranty fees, and even unforeseen system failures. But creating a budget from scratch isn't easy. That's why we've zeroed in on the top 13 spending categories that your IT budget must to include.
Foundational IT Budget Categories
“Keeping the lights on,” so to speak, matters in IT. Your budget must include the labor costs to do the work of IT plus buy, lease, maintain, and upgrade the technology itself. Just because these items are obvious, be careful not to overlook them.
Imagine for a moment that your company’s Internet connection goes down - how much work would your staff be able to do? Similarly, what would be the drain on productivity if the connection speed made everyday tasks take longer?
Your company’s Internet connection is clearly vital to your operation. When budgeting for this line item, here are a few factors to consider:
- Current offers available from vendors
- Anticipated changes to the business or network demands
- Remote workers
2. Equipment updates & upgrades
The first step in budgeting for updating and upgrading your technology is to confirm what your company already owns or leases. Sometimes employees are provided multiple computers, for example. Remote and home offices have additional items like modems, monitors, and docking stations. Your total array of technology may be larger than you realize.
Once you have your arms around the equipment in place, you should include regular technological refreshes in your plan. This ensures that your infrastructure can keep up with your users’ needs.
3. Licenses and warranty fees
Just like the hardware in item #2, your software operating systems and applications need to be inventoried and their ongoing costs estimated. Fees may include support costs for perpetual software licenses and application subscription fees (SaaS and otherwise). Additionally, your company may have opted to purchase warranties on certain hardware and software systems.
4. Management & labor
Do you have a certain budget set aside for hiring internal staff members or collaborating with IT service providers? Your annual IT budget must accommodate salaries, bonuses and benefits paid to IT staff. Also, make sure you have a dedicated budget for hiring new resources and providing IT training to the workforce.
This is also the place to incorporate any spending on outside IT resources. Partnering with an IT service provider can offer greater flexibility while providing access to a wider array of skills than you would be able to hire directly.
As you review your costs and project your budget into the coming year, consider your options:
- Internal support (employees only)
- External support (complete outsourcing, including at strategy and management level)
- Hybrid support (combination of in-house and outsourced)
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Security IT Budget Categories
Given the current rise in attacks on company technology and data, security should be a top priority when preparing your IT budget. Your business needs a security strategy that includes a comprehensive and team-based approach to thwart attacks, especially considering the industry’s persistent shortage of experienced security experts.
As a fast-moving “industry,” cyber crime is forcing rapid change among the strategies and technologies required to fight it. Companies across the spectrum are recognizing the need to detect vulnerabilities before cybercriminals can exploit them and alert management to any type of incursion.
For these reasons, you should avoid “rubber-stamping” an extension to your existing cybersecurity budget. Get help to evaluate your options and consider new methods of protection.
6. Physical security
You don’t just need protection from the bad guys online — you need to also consider physical security threats such as break-ins, employee safety, and on-site accidents, while planning your security budget. You may want to allocate funds for access-control systems, insurance, surveillance devices, and commercial door locks as part of your security budget.
7. Backups & Disaster Recovery
Imagine receiving a late-night email from a cybercriminal demanding a significant ransom. Panicked, you log into your company’s network only to find that your systems have been encrypted by hackers, and you haven’t backed up any data in months. How will you cope with this crisis? It’s not just about downtime or revenue loss, you couldn’t protect customer data and might lose their trust forever.
Knowing how much money you’ll need to invest to keep your business operating in the event of a disaster is one of the most crucial components of your data backup strategy. A cloud backup solution ensures your business will continue to provide excellent service, regardless of a ransomware attack, natural disaster or hardware failure.
Depending on your company’s unique needs, the price of the systems and solutions that support backup, disaster recovery and business continuity may vary.
8. Security user awareness training
Keeping employees up to date about how to protect themselves and your organization from threats is a crucial component of a healthy security strategy. Your staff should receive regular cybersecurity training so they are aware of good cyber hygiene, the security risks associated with their actions, and how to spot cyberattacks they could come across via email and the web.
An IT service provider can help with security awareness training services if your organization lacks internal security resources and expertise. At Endsight, we’ve decided to provide free training every month to anyone who wants to attend. Register for our next training here.
Project IT Budgeting
From time to time you’ll need to tackle bigger changes in your IT infrastructure. Think about your IT like you would your home. For the most part, paying your bills and keeping everything organized and clean are sufficient. But once in a while, a major appliance breaks or you recognize the need for a bigger change, like a kitchen remodel.
Take a similar approach to proactively plan for your “extra” IT needs, then (like you would at home) figure out which ones are important enough to tackle now vs. defer.
9. Growing & optimizing
In addition to budgeting for technology refreshes, like we mention in the Foundation section above, you may need to allocate funds to support growth in the number of employees, for example. Periodically, you’ll also want to incorporate new equipment and software tools to improve productivity or enable new business initiatives.
10. Incidents & accidents
You'll need a place in your budget to address an accident or incident, such as a major system crash or ransomware attack. Of course, sufficient investments in security and system maintenance will translate to a lower amount of money you’ll need to include here.
Special Requirements IT Budgeting
Failure to comply with industry regulations may lead to severe fines, work stoppages, legal action or even the closure of your company. Being compliant is not a choice, it is mandatory. Your company’s requirements will be governed largely by your industry, location, and company size.
Before you invest in any tool, assess your current compliance needs first and create a roadmap of your long-term needs. It’s better to go with a tool that can suit both your present and future needs when estimating the cost of your compliance and risk management solution.
12. Changing vendors or business model
In a special category of “growing and optimizing,” it’s useful to point out that your company may make strategic decisions that significantly affect how you manage (and budget for) IT. Will you undergo massive hiring to build a business unit or salesforce? Will you shift the way you manage IT from your current approach to another one (like we outline in item #4)? Perhaps you’ll downsize an office and dramatically increase the number of remote users. Take these possibilities into account.
Acquiring or merging with another company creates both challenges and opportunities. If this is in the cards for the coming year, spend some time to think through the impact on your IT priorities and budget.
Conclusion: IT Budgeting is a Collaboration
Developing your IT budget is a big responsibility that requires collaboration with other departments and insight into company priorities. Consider these 13 items as you get started and you’ll speed up your budgeting process, allowing more time to discuss the issues and possibilities.
Want help avoiding common pitfalls in IT planning and budgeting? We help companies focus their resources on the right IT tools and effort. In fact, we do this so much that we developed a three-step process to audit, analyze gaps, and make recommendations for optimizing your IT environment.