Crunching the numbers: How much should you spend on IT?

Let’s talk about IT budgeting.

And look, we get it – it’s not a fun subject by any stretch of the imagination. However, it’s really important to understand if you’re spending too little or too much on technology.

Why?

Because your business probably relies heavily on a technology infrastructure. It’s no secret that businesses that thrive and succeed are the ones that invest in their infrastructure to get great results.

Still, the question remains – how do you begin to calculate how much you should spend on technology?

Scoping out the averages

Before we dive into numbers, let’s clarify what’s covered in an IT budget.

We’re talking about hardware and software investments that relate to IT, as well as personnel costs. Anything from computers to servers and cloud services to IT support staff counts.

And by the way, if you’re looking for additional help in getting a budget set up, you can always get an IT consultant (like Ripple) to help you out.

Deloitte shows us that most organizations spend 3.28% of their total revenue on some form of IT. Companies in the financial sector, such as banks, actually spend the most at 7.16%.

That’s primarily due to the fact that they have lots of regulations to follow, and a single breach of their data could cause problems big enough to shut their business down.

On the other hand, four major industries came in below the average for IT spending:

  • Energy and resources (2.50%)
  • Consumer business and retail (2.04%)
  • Manufacturing (1.95%)
  • Construction (1.51%)

Despite these sectors spending below average levels on IT, they’re all growing. For example, the construction industry grew their IT budget by 45% over the previous year.

So why the sudden explosion in IT investment?

Simply put: There’s ROI to be found in IT because the right technology can help you work faster and more effectively while making your people happier.

Wondering how to get started in adjusting your budget to get the right numbers? Start by …

1. Actually building your budget in the first place

You’ll find it’s hard to measure and compare your IT finances to other areas of spending if you aren’t tracking any of them. If you’re interested in a guide to building your budget from the ground up, check out this blog from Capterra.

2. Thinking about what matters most to your business

In IT, as with many other things, more spending is not the same as better spending. Give some thought to where you need the biggest technology boost.

For example, let’s say you’re a small marketing agency. You’ve got a definite need for smooth screen sharing and video conferencing infrastructure, since that’s how you talk to most of your clients. So, it’s probably a good idea to invest in the communications platform that can fit your needs over a set of printers for every employee.

3. Looking at information technology as a partner, not a monster

IT used to be this big, ugly monster that nobody wanted to talk about.

You were a prisoner to it. You needed it, and you didn’t seem to get anything out of it beyond your business not crashing and burning. However, today’s technology is much more … attractive.

SMBs are quickly discovering that selectively putting good technology into place, along with good support, keeps everything humming along. In fact, it can even help you gain and retain clients by giving others a better experience in working with you.

We’ve mentioned it a few times above, and it’s true – IT is an investment, not an expense. Once you’ve made the mindset switch, it’s a lot easier to understand what kind of technology makes the best use of your company’s money and why.

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