For your IT services to run successfully, managing your IT budget may be one of the most important steps you take this year. A well-designed IT budget will reflect your technology strategy and what you and your team want to accomplish with your funds. Going through this process properly will help ensure that you have the funds available for important projects as they arise, rather than having to petition executives later or justify expenses along the way. According to Gartner, global IT spending was expected to reach $3.75 trillion in 2021. Knowing how to manage the funds you have available for your team can help you take the necessary steps to excel.
We are going to explore what you need to know about drafting your IT budget for success.
Why You Need an IT Budget for Your IT Services
It can be tempting to view IT budgeting as simply your opportunity to try and secure as much funding as you can for your team. However, this strategy leaves your budget wide open to critique, and your struggle to justify your different budget lines leaves you open to budget cuts.
Instead, creating a successful budget calls for you to be transparent about costs and why you have included these important items. This type of budgeting forces IT leaders to think about their priorities and where they want to spend their funds. In other words, you have to develop an IT strategy with plans and projections in place.
Taking this strategy to heart can accomplish two goals:
1. You will be able to outline your priorities to your team and your higher-ups so that they see what you need to spend and why. This makes it harder for them to subject you to budget cuts and, instead, gives you a budget in line with your goals.
2. You will have to plan ahead for your likely costs and, thus, you will have the budget and tools in place for your team when you need them. This leads to more efficiency than having to justify expenses in the moment and trying to secure what you need.
With that in mind, let’s consider the budget items you want to remember as you start to plan.
Breaking Down Your IT Budget: Components
Before getting started, you want to take a close look at your IT budget from last year. This can give you a bottom line and an outline to follow. You can see where you allocated money throughout the year and use this as your basis for comparison for the upcoming year. Your executive team will want to see how much your IT budget will increase from the previous year and why, and this provides you with the information you need to begin forming your plan.
The first portion of your IT budget should be dedicated to your fixed costs. These are the costs that will not change month to month, helping you know precisely what you can expect to pay in these areas.
Staff and their compensation
Outline your team and their compensation. When calculating the funds needed to cover the staff, do not forget to include the bonuses and benefits your team receives. Also, remember to include any part-time staff that work set hours throughout the month.
In this area, it is a good idea to include a budget for recruiting and training new employees. If you need to hire a new team member, you want to make sure you have the funds available to cover this process.
All organizations require IT hardware. Even if you have bring-your-own-device policies, you likely still supply technology such as servers and in-office devices. You need to make sure you include any costs related to your infrastructure, including maintenance costs. Remember that regularly maintaining hardware is significantly cheaper and more convenient than having cumulative problems that erupt because they were not handled when they were small.
When considering these costs, remember to account for updating employee devices or the budget allocated to employees for them to secure their own devices.
Organizations need to account for various types of specialized software that allow them to excel in their industry. Businesses might find that they even require customized software, which calls for research and development costs and specialized maintenance costs.
When pricing software licensing contracts, do not forget to account for any maintenance or upgrade costs as well.
You will find that some types of IT costs will fluctuate from month to month, which we will refer to as flexible costs. To build these into your budget, you will need to carefully consider how much you plan to spend in these areas on average. Costs associated with these areas in the past and research into expected prices can help you plan for these expenses.
As you prepare your budget, consider any major projects that you expect to tackle over the next year. Examine these carefully from a project management perspective. For example, consider the hardware and software needed to complete the project and the costs associated with each. Think also about the consultants, contractors, and part-time or full-time employees needed to complete it. Working with an IT services provider may make it considerably easier to complete certain types of projects, which can make this an important budget consideration.
Consultants and consulting services can provide your organization with invaluable advice. For example, they can help you with your new IT projects, help you build your IT systems, provide cybersecurity consulting, and otherwise offer IT services to help your organization grow. Knowing how your IT consulting needs will rise and fall over the course of the year can help you determine your budget estimate for these expected costs.
Business continuity and disaster recovery
You do not want to neglect the costs associated with your server backup and disaster recovery. You will likely have relatively consistent costs associated with maintaining your backups throughout the year, particularly if you use an IT services partner to provide you with remote backups.
However, you do not want to overlook the costs associated with disaster recovery, particularly if you do suffer a cyberattack and need to utilize the backups to recover your files. Recovering from a cyberattack can be devastating enough, and you do not want to amplify the problem by having a team unprepared for the cost and process of completing the disaster recovery.
The cloud has become a critical component of running a successful business, particularly as the pandemic has resulted in an explosion of remote work. Businesses appreciate a variety of features that they can leverage with the cloud, including the ability to scale according to their needs. As you build your IT budget, consider your likely cloud usage needs and the associated costs. Note how these costs might change throughout the year.
How Nutmeg Consulting Can Help You With Your IT Budget
When it comes to your IT budget, you know the importance of making sure you have allocated enough money to cover your critical expenses while also making sure that you do not overspend.
We can walk you through each step of planning your IT budget so that you can move forward confidently. Experience the value of a well-planned budget that aligns with your strategy for the following year.