As an average rule of the thumb, companies tend to spend about 3.28% of their revenues on IT. However, the figure differs depending on industry sectors, with banking firms spending over 7% of their budget on IT and construction industries spending less than 2%. There are also other factors to take into considerations, such as your company size, your location, your audience, and your growth profile.
As a result, if you’re considering your IT budget, it can be tricky to compare effectively against competitors on the market. While there’s no denying that the company needs to establish a strategic method to decide on the tech expenses, it’s easy to understand that you won’t find the solution online. Indeed, it is the role of the IT director or the CIO to not only use the most relevant data to come to build the budget but also to consider the potential of growth investments. As a result, there is more than one answer to the question: How much should I spend on IT? Even if you were to use 3.28% as a reference to position your tech budget vs your overall revenues, there is too much variety in terms of solutions and applications to provide clear guidance.
Instead, you should focus your attention on asking yourself questions that highlight the way your company uses technology.
Have you chosen well?
The first and most important question of all refers to the very nature of the available IT solutions. Indeed, with hundreds of different tools on the market, it can be tricky to know which solution is the most suitable for your company. While you might be tempted by quick and easy software tools that can be installed in a click, you need to take a step back and consider if your choice is worth the expense. Indeed, not all solutions share similar levels of competency. For instance, while you can’t afford to work with old-fashioned tech that might put your data and processes at risk, you need to review compatibility aspects before committing to the purchase of the latest, most innovative, or most powerful solution on the market. Digital systems that can integrate with your existing structure and keep your staff operational make a safe investment.
Can you evaluate your budget objectively?
You can’t objectively consider your IT expenses and know whether you’re over- or under-spending. Indeed, there’s more to your IT budget than the sum you’ve chosen to spend. As a result, if you’re considering IT cost reduction in the future, you need to establish an applicable and reasonable benchmark of comparison. There’s no denying that you can’t use an average figure such as the 3.28% result. The empirical calculation serves as a reference but doesn’t provide a strategy that is tailored to your specific situation and industry. Indeed, you can use sector data without proper analysis of your organisation. You need to identify precisely the areas that require improvements – based on observed facts –, negotiation and strategic advice. Bear in mind that you can’t manage your budget without the feedback of an IT expert!
Is my team ready for new tech?
Innovative technology is full of promises. However, more often than not, innovation comes at a cost; namely, your team doesn’t know how to use the new tools. However, too many business owners continue to plan investments in technology changes without considering appropriate training strategies for their staff. You can’t afford to ignore the cost of training – as the cost of not-training your team could be devastating! Therefore, training planning should be a priority to manage not at the same time than purchase, but ahead of purchase. If there are no training options available, it’s likely that your employees might struggle to learn how a handle a new system. It could lead to reduced productivity, losses; and even staff turnover.
Do you have more tech than you need?
The use of technology is in the office has been increasing steadily over the past decades. It comes as a surprise to no one that technology has become an integral part of a business structure. However, the expectations employees and employers have on technology can lead to biting more than you can chew. Ultimately, it’s not uncommon to have more tech than you need. Consequently, it’s important to keep a clear mind and quantify your IT and tech gadget usage in the office. It’s a good idea, for instance, to use your commercial property requirements as a roadmap to define the exact needs of your business.
Should you reduce the use of personal tech?
Companies have a divided opinion when it comes to personal tech in the office. Indeed, while some business leaders turn a blind eye when their employees use their smartphones or social media profiles during working hours, others prefer to take costly measures to prevent personal interests from affecting the office life. The question you need to ask yourself is not whether you should block personal tech, but what you could lose from embracing a traditional view on technology. Indeed, employees can connect to clients, engage in productive debate on social media and find new ideas during their working hours when they are allowed to browse the web as they please. As a result, your team is more engaged and can better represent the business.
Does your tech solution fulfil the team purpose?
Everywhere in the world, remote working options appeal to millions of workers who want to achieve a new work/life balance. However, while numerous clouding solutions provide access to remote workers, you need to consider a psychological approach when choosing the right remote tech. Indeed, your team relies on technology to maintain the work community; consequently, your solutions should not only offer secure access to data but also encourage communication and exchanges.
Does more mean better?
There is a misconception for small businesses that implies that increasing the technology in the office encourages productivity. In reality, you need to focus on technology that helps your team to work faster or better, rather than technology that reflects on your company status. You don’t need to buy more to achieve better ROI!
How much of your IT budget is wasted in the wrong decisions? It’s impossible to know. But hopefully, by asking the right questions, you can make decisions that are better suited to your business needs.