Published: June 10, 2021When it comes to allocating money for your business, creating an IT budget is of the utmost importance. When done right, an IT budget not only bolsters your IT department, outsourced or not, but it also helps in communication and planning for your whole business. IT is a huge part of the backbone of your business, so budgeting correctly for it is essential to business strength and growth.
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How to Budget for IT
Historically, business have treated technology as an expense, no different than paying the electric bill. But as technology has advanced and businesses have changed, technology now should be considered an asset or a piece of your organization that helps to drive value. With that in mind, you should budget for IT no different than how you budget any other revenue stream of your business.
First, think about your overall business goal for the year and consider how IT fits into that goal. If you are trying to grow your business, figure out what sort of technology will help you scale. If you are trying to be leaner, determine what technology can make you more efficient. By starting with a goal, you can change the way you think about technology budgeting, taking it from a list of expenses and turning it into a tool for business growth.
Next, refer to your budget from the previous year and assess how it served you. Compare your budget to the year’s actual costs and determine if you over or under-allocated money to certain areas. You can also use this review as a way to assess what areas you saw the most return from your investments. Then, use all of this information to start building your budget for the coming year.
Additionally, it’s smart to consider a rolling forecast model when building your budget, as 64% of annual forecast targets become outdated in four-to-six months. Continually assess your budget and be prepared to adapt it as the year unfolds.
The general costs areas to consider for IT budgets are hardware, software, subscriptions, and services. Hardware is any physical equipment you may need such as servers, switches, computers, and firewalls. When budgeting for hardware, along with the cost of the piece of equipment, it’s important to include the cost of installation, warranties, and maintenance that often go along with it.
The software category is made up of the programs and applications that make hardware run. Costs for software can include both the installation of the program itself along with any ongoing licensing fees or upgrade costs.
Subscriptions and services can include items like outsourced IT support, information security training, and third-party technology advisors. The costs for these items can vary widely and often involve vendor contracts, but they still should be budgeted for as best as possible.
Managed Service Providers Can Help
Forecasting the amount you’ll need to spend on the technology items mentioned above can be overwhelming. That’s where third-party services can come in handy. Managed IT Service Providers like Solution Builders can help you not only plan your budget, but also successfully allocate and adapt it throughout the year. Our subject matter experts and Virtual CIOs can help design your budget and manage your technology as your technology partner, making it easier for you to focus on running and growing your business.
By Taylor J. Bye, Customer Engagement Specialist
