Over time, as technology has become a greater part of business operations, IT budgets have continued to grow, with small to mid-size companies generally outspending larger organizations when allocating dollars for technology investment. According to the State of the CIO report, the average small business (less than $50 million in yearly revenue) is investing 6.9% of their total annual budget on technology. Regardless of the actual dollars spent, the goal of any organization is to make wise and judicious decisions when planning IT expenditures. Like a project plan or IT roadmap, your IT budget provides direction and a holistic view of your department and its funding requirements. It lets you quickly determine whether resources are over committed in one area or another, and in the case of department-level IT budgets, lets you compare what you’re spending versus similar departments.
In order to produce a reliable IT budget, it’s critical that your organization lay out an IT investment strategy that aligns with the specific short and long-term goals of your organization. Aligning these goals with the basic budgeting priorities that lay in front of you can be a challenge; here are suggested steps to keep in mind throughout the process. These steps will help you determine the best technology investments for the near-term, (we have a few suggestions), as well as keep your long-term investment strategy front and center.
First, make sure you have a clear picture of where you want to take your business, and what steps you need to take to get there. Start by looking at your business strategy over the next two to three years and determine which areas you plan to grow, change, or improve; this will help simplify the IT budget decision-making process, and make it easier to identify what new technologies and upgrades are the best fit for your organization.
Once you have your strategy in place, designate a member of your team to track IT trends and opportunities that might be available to your company. Meet with this person regularly to discuss the key areas where your organization may need technological upgrades or changes. Sit down regularly with this team member and list the key technology areas they should be monitoring based on your business needs. Are there new applications available that might enhance your business, or new web or wireless services to consider? What about your data warehousing? Building this list allows you to assess what technologies are likely to impact your business and what growth opportunities they might provide. This list of technologies and opportunities is a way for you to narrow down your technology requirements and come up with a well-thought-out investment plan.
Once you have decided on a new IT spending plan, make sure to speak with a trusted IT consultant and run a cost/benefit analysis. An expert can help you determine if your technology budget plan is realistic and whether or not there might be more appropriate solutions available to you. The 6-7% average budget mentioned above is a basic guideline, but the final number will depend on your company’s individual needs and goals. Keep revisiting your IT budget every year, taking into account the cost of maintaining and supporting the technology you already have in place. It would be a huge mistake to use the same budgeting model year after year, without considering new technologies or current changes in the IT landscape (advancements in in computers, phones, tablets, POS systems, cloud storage, data backup, software etc.). It’s critically important to monitor the newest in tech advancements to ensure that your company is making the best technology investments to promote profitability and productivity.
Next, create a list of those IT investments that you can not only afford, but will also help you achieve your stated business goals. Every business is different, and the technology that your organization decides to use should fully meet the needs of individual departments while still being flexible enough to integrate new technologies as needed, without compromising daily business operations. This is where your assessment and planning can really pay off, helping you determine where to best spend your technology dollars. Key areas you might consider for further IT budget and investment are cloud and mobile computing, Internet of Things (IoT) and advanced cybersecurity protection.
Once you’ve decided on investment in a new IT project, do a proper risk analysis. When investing in any new technology project take the time to do a complete risk analysis. The project that offers the greatest benefit may also be the one that requires the most time, money, and staff, and investing in one large project may mean you don’t have the resources to invest in others. Make sure you have identified the likely risks associated with the project, quantified the cost of these risks, prepared an appropriate response, as well as documented the analysis and plan. By performing this analysis and planning for possible overruns, you’ll have a more realistic idea of the costs and delays you could be facing. If the project comes in on time and on budget, it will be a pleasant surprise!
Finally, continue to update your IT budget and investment plan and monitor new technology developments. The last thing you want is an aged IT strategy that misses out on the current opportunities in the marketplace. Keep in constant communication with your trusted IT advisor, and once you embark on a project, update your investment plan with new deadlines or cost estimates.
As a small business owner or manager, its critical to remember that your IT expenditures are an investment into the operations and flow of your organization, rather than a cost of doing business. Instead of looking at the budget solely as an administrative process, regard it as a validation and support tool for your IT strategy. If you don’t have a formal or informal IT strategy in place, the budgeting process is as good a place as any to start investigating areas for improvement that will be cornerstones of your first attempts at more strategic IT management.
At eGuard Tech Services, we are here to assist you in making the most of your IT assets and investment planning; let’s build your new IT strategy together. Contact us today to get started.