A well-thought-out budget is critical to your company’s success. Without it, different departments will be unable to grasp their spending restrictions, causing the company’s financial resources to be stretched thin.
If your company relies on technology in any way, you’ll need a reasonable IT budget for 2022. We recognize that IT is difficult to budget for, mainly because it is such a broad topic that includes cybersecurity, networking, cloud computing, and other issues. That’s why we’ve put together this guide to assist you in creating a successful IT budget for 2022.
What is the definition of an IT budget?
An IT budget is the amount of money set aside to support a company’s goals through technology solutions and services. It includes three types of IT expenses capital, operating, and project costs.
Fixed asset purchases, such as new laptops, networking hardware, lifetime software licenses, and server upgrades are capital expenses. Cloud subscriptions, maintenance services, technical support, and remuneration for IT personnel are examples of operating expenses that are vital to the company’s operations. Finally, project costs are linked with assisting a company’s strategic initiatives, such as disaster recovery planning, cloud migrations, or the deployment of hybrid work.
The chief information officer is usually in charge of putting together the company’s annual IT budget. They determine if particular expenses are justified and which costs might be reduced to increase profitability and growth. The IT budget ideas are reviewed and approved by finance teams and other executives.
What is the significance of IT budgeting?
When vital components of your IT system receive insufficient resources, your firm may experience decreased productivity, customer backlash, and low profitability. For example, ignoring hardware updates means you’ll be left with old and slow PCs that can’t run the latest programs, lowering staff productivity and driving up costs in the long term.
Effective IT budgeting, on the other hand, aids in the funding of the technological solutions and services that your company requires. It guarantees sufficient resources to keep your systems functioning at peak performance and allows IT teams to implement game-changing tactics.
Furthermore, a well-crafted budget allows critical decision-makers to see precisely how much money is spent on IT on overall business performance. They can then utilize these insights to eliminate unnecessary overhead costs and divert cash to higher-priority projects throughout the year.
How should firms budget for IT?
If you want to develop an IT budget that generates value in the following years, you must follow a few best practices.
1. Examine your current infrastructure.
The first step is to undertake a thorough audit of your current IT infrastructure. This entails compiling a list of your organization’s software and physical assets. Patch dates, locations, warranties, licenses, charges, and vendor information should be listed in great detail in these inventories.
You’ll know when to budget for upgrades, updates, and replacements. Computers have a five-year life cycle covered by the manufacturer’s warranty. Knowing where your PCs are in the life cycle will help you determine whether it’s time for a hardware upgrade. You jeopardize downtime and productivity losses if you haven’t adequately accounted for these circumstances.
2. Identify the problems that your firm is experiencing.
You should also evaluate whether your IT can adequately support your company’s expansion and infrastructure assessments. This method will always reveal inefficiencies in your systems and procedures, but it’s essential in determining strategic goals and IT budgets. Inefficiencies or pain spots in technology can take numerous forms, including:
- Networks that are slow and unreliable
- Inadequate security measures
- Noncompliance with industry rules such as HIPAA and PCI DSS due to poor communication and collaboration
- Security knowledge is lacking.
3. Align budgets with business objectives
An IT budget shouldn’t just be a wish list of technology purchases. Instead, it should take into account the company’s objectives. You can better prioritize spending by connecting budgeting processes with your company’s goals. If sophisticated ransomware is a persistent problem, you may need to set aside a significant percentage of your budget to execute a comprehensive cybersecurity strategy. This may entail spending money on next-generation firewalls, intrusion prevention systems, anti-malware software, data backups, and security training.
Long-term goals divided into smaller expenditures should also be factored into your budget. Assume you intend to create a permanent hybrid work environment. To achieve this, investing in cloud-based productivity tools, mobile device management software, company-issued laptops or cloud PCs, and business messaging platforms would be helpful to IT budget items.
4. Establish a budgeting timeline
A budget timeline maintains track of when your strategic investments begin and stop. This is especially useful for predicting when your organization will incur certain expenses so you can budget accordingly. If you’re going to replace your current network infrastructure in the second quarter, you might want to hold off on other less critical tech purchases during that time.
When planning your budget, avoid making all of your large purchases in the first few months of the year. Early cash burn can leave your company unable to cover unforeseen costs such as replacing broken gear or responding to a cyberattack. Utilizing the experience of IT consultants and your in-house team during the early planning stages is the key to generating a realistic budget timeframe. Their suggestions might help you figure out when to invest and how to budget for technology throughout the year.
5. Plan for contingencies in your budget.
Several events can cause business operations to be disrupted. The COVID-19 epidemic, in particular, resulted in a widespread flight from traditional office settings to remote work environments. Furthermore, when a company is hit by a natural disaster or a ransomware assault, it must divert tens of thousands of dollars from other projects to get back up and running.
As a result, unforeseen events must be factored into your budget. It should factor in the cost of restoring service in a power loss, data breach, or other major catastrophes. A significant percentage of your money should be set up for disaster recovery and cybersecurity incident response procedures. Consider what could go wrong and leave additional room in your budget to avoid downtime.
6. Review and Change your Budget regularly.
One of the quickest ways to squander resources and drive up prices is to have an IT budget that is only updated every 12 months. New trends and technologies may emerge over a year, requiring you to adapt your budget accordingly. As a result, it’s critical to examine your budget every quarter and make adjustments as appropriate, whether you’re launching new initiatives or reallocating resources from less successful ones. Regularly updating your budget also prevents you from being caught off guard by an unexpected increase in costs, which may substantially impact your company’s bottom line.
Budgeting for the future is never simple, but it’s even more difficult in these unpredictable times. If you require professional assistance with the IT budgeting process, IT Consulting Companies in Dallas, Chicago, and other locations worldwide can assist you. Their consultants will assess your company’s present infrastructure. They can make recommendations for spending your IT budget in 2022 to meet your objectives.