Get Smart: The Benefits of An IT Budget
Every business needs technology, from the C-Suite down to tech support. We all know how it goes: over budget now, pay more later - tech spend adds up...
Budgets are a key part of the effective management of any business. Being able to control spending and prioritize what should or shouldn’t receive funding is crucial for ensuring stability in any key business operation. IT operations are no different.
According to Gartner, global IT spending is projected to reach $3.75 trillion dollars in 2021—a growth of 4% over IT spend in 2020. However, simply spending more on information technology doesn’t guarantee success. On the other hand, not spending enough on the right IT initiatives can compromise a business’ competitiveness.
Having a well-planned IT budget is crucial for ensuring that the business has the right information technology tools in place. Without sufficient budget planning, it is all too easy for IT departments to waste money on frivolous tech that doesn’t provide much ROI—or to be underfunded to the point that they cannot accomplish their core goals.
A strong IT budget can help a business meet its most critical goals by helping them acquire the right technology at the right time. Technology spending is a crucial part of modern business—setting a budget is how companies focus their spending on achieving positive business outcomes.
As noted by Tech Republic, “IT budgeting can range from a painful annual process to the actualization of a carefully crafted IT strategy and roadmap.” While the process of creating a budget can be stressful, it is often well worth it!
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While there will always be some differences depending on the organization, its goals, how it uses IT resources, and even specific workflows and data management tools, there are some things that every IT budget should account for. Here’s a shortlist of some of the most critical components of an IT budget:
These are just a few of the top-level categories that a company might need to include in an IT budget template. Many of these cost categories can be further sub-divided into specific types of IT expenses—and there are places where they overlap.
For example, do server racks belong in the “Hardware expenses” category, or the “IT Overhead” category? Is internal IT staff labor for hardware and software maintenance an IT staffing expense, a maintenance expense, or (in the case of a major overhaul) an IT project expense?
It’s important to ensure that, when you craft your IT budget, that questions like these can be answered consistently so that IT expenses aren't tracked twice.
When creating an IT budget for a given quarter or the year as a whole, it can help to compare your planned IT spend to what you spent in the previous quarter or year.
Here’s a quick, generic template for planning your yearly IT budget:
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Full-Time IT Staff |
$208,000 |
$212,000 |
$4,000 |
Part-Time IT Staff |
$100,000 |
$110,000 |
$10,000 |
IT Staff Benefits |
$100,000 |
$120,000 |
$20,000 |
Total |
$408,000 |
$442,000 |
$34,000 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
New Employee Devices |
$50,000 |
$45,000 |
-$5,000 |
Servers |
$75,000 |
$20,000 |
-$55,000 |
IT Infrastructure (power & data cabling) |
$10,000 |
$10,000 |
$0 |
Total |
$135,000 |
$75,000 |
-$60,000 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Licensing Costs |
$50,000 |
$50,000 |
$0 |
Subscription Costs |
$30,000 |
$30,000 |
$0 |
Total |
$80,000 |
$80,000 |
$0 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Outsourced IT Staff |
$150,000 |
$150,000 |
$0 |
Managed Security Services |
$100,000 |
$100,000 |
$0 |
Data Backup Solution |
$30,000 |
$50,000 |
$20,000 |
Total |
$280,000 |
$300,000 |
$20,000 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Data Center Maintenance |
$12,000 |
$8,000 |
-$4,000 |
Employee Device Maintenance |
$10,000 |
$10,000 |
$0 |
Spare IT Components |
$500 |
$500 |
$0 |
Total |
$22,500 |
$18,500 |
-$4,000 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Data Center Real Estate Acquisition |
$100,000 |
$0 |
-$100,000 |
Expansion Costs |
$10,000 |
$20,000 |
$10,000 |
Security Costs |
$50,000 |
$50,000 |
$0 |
Server Update Costs |
$400,000 |
$50,000 |
-$350,000 |
Total |
$560,000 |
$120,000 |
-$440,000 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Power |
$10,000 |
$10,000 |
$0 |
Internet Access Costs |
$50,000 |
$50,000 |
$0 |
Data Center Cooling |
$50,000 |
$20,000 |
-$30,000 |
Total |
$110,000 |
$80,000 |
-$30,000 |
Expense Category |
Last Year’s Spend |
Projected IT Spend |
Difference |
Staffing |
$408,000 |
$442,000 |
$34,000 |
Hardware |
$135,000 |
$75,000 |
-$60,000 |
Software |
$80,000 |
$80,000 |
$0 |
Outsourced Services |
$280,000 |
$300,000 |
$20,000 |
Maintenance |
$22,500 |
$18,500 |
-$4,000 |
Data Center |
$560,000 |
$120,000 |
-$440,000 |
Utilities |
$110,000 |
$80,000 |
-$30,000 |
Total |
$1,595,500 |
$1,115,500 |
-$480,000 |
This template example is far from comprehensive and reflects a hypothetical example of a company that had a major capital outlay for a new data center and employee devices just the previous year. When creating your own IT budget template, it may help to reflect on the specific costs that affect your company’s IT expenses so you can plan around them.
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