How to Right-Size Your IT Budget

Every organization has a budget in order to operate effectively, but how much spending should go toward technology? As a business leader, how do you begin to right-size your IT budget in a manner that guarantees fulfillment of the technology needs of your organization year over year?

Proper planning and strategy can help you right-size your IT budget for your organization. Whether you have a single individual as your IT department or outsource to a managed service provider, it is possible for any small to mid-sized business to right-size their IT budget with the proper amount of planning and strategy.

What Does an IT Budget Cover?

When right-sizing your IT budget, it’s important to know where all of your money is going and what costs are covering. IT budgeting helps provide funds required to keep your department running. It helps in identifying and implementing IT initiatives that are critical to your department. IT budgeting can be viewed as an investment in IT resources that not only helps improve business efficiency but also drives growth and profits in the long term.

Gartner’s Glossary tells us an IT budget is the enterprise’s total allocation of IT spending over a 12-month period. The IT budget covers hardware, software, personnel, outsourcing, disaster recovery and occupancy costs associated with supporting IT within the enterprise. To cover the costs of these expenses, your budget will require planning on both a short-term and long-term basis.

Short-Term and Long-Term Goals for Your IT Budget

1. Review the IT Budget From Last Year

If you have an IT budget from the year prior, it’s important to review it to determine where you may want to make changes. If money was spent on new equipment in the previous year (or recent years), then you probably won’t need to buy those same items again.

The previous year’s budget will help you to find recurring expenses easily.

2. Closely Examine Recurring Expenses

Fortunately, there are a certain few IT costs that won’t drastically change in expense from year to year. Common recurring IT expenses include:

Cloud storage space.
Renewing software licenses.
URL registration.
Content management systems.

Your recurring costs may differ from those of other companies. Take a close look at how your business spends money, identifying recurring expenses that you haven’t included in past budgets so that you can add them to your current budget.

3. Take Inventory of Your IT Equipment

Make a list of your IT equipment and note the age of each item. Once you have a completed list, you can decide whether you need to update your equipment.

You have some discretion when it comes to how often you update your IT equipment. Most companies purchase new desktop and laptop computers every three to five years. A 5-year-old computer may seem to work well, but it probably can’t keep up with the speed of newer models. Hanging on to old equipment, therefore, could lower productivity. Recommended pieces of technology to update routinely (every three to five years) include:

On-site servers
WiFi routers
Mobile devices (smartphones, tablets)

If it’s time to upgrade your IT equipment, then it’s time to create a line item for that expense. If you don’t need any upgrades, then you can reserve your money for that particular tech until the time comes to upgrade.

4. Consolidate Databases and Applications

At least as much as realistic and feasible, consolidating your databases can help you reduce costs. Whether living in the cloud or an onsite server, reducing how many places your data lives can scale back your IT infrastructure costs.

5. Have the Conversation With Your Team

Your employees and managers may have a better idea than you do about what upgrades you need. After all, they’re the people who use your equipment and applications daily.

Take some time to talk to your managers and employees to learn more about what they would like to see in next year’s IT budget. If you hear the same requests from a considerable number of people, add that line item to your budget once it is determined that there will be some return on your investment.

6. Plan for the Future

The current year’s budget should include a line for research and development to improve your organization’s ability to compete with other businesses in your industry. Depending on your industry, this may include the following:

Sending managers to IT conferences.
Hiring coders and developers.
Improving your IT infrastructure and cyber security defenses.

Researching your future needs will make it easier for you to predict expenses and develop an IT budget that will cover more than just the current year’s spending.

Right-Sizing Your IT Budget

Once you have reviewed the previous year’s IT expenses, examined recurring costs, taken stock of existing equipment and planned for the future of your business, you have armed yourself with critical components toward right-sizing your IT budget.

If you are like most business leaders who aim to reduce their IT operational costs and do more with less, then you understand the importance of what using these recommended tactics means for your business when planning and implementing a smart budgeting strategy.

Planning With the Professionals

A well-defined IT budget can be a roadmap to your IT strategy. IT budgets are created not only to secure funds from your C-level executives but to also help you identify and execute crucial IT initiatives for your organization.Your organization’s growth can’t wait. At ArcLight, we take a human approach to your questions and concerns to uncover your business needs and build a strategy around the future of your business. Book an appointment with us today to start right-sizing your IT budget and create a path forward for your Tulsa business.