How to Accurately Assess Your IT Spend

By May 14, 2019 October 16th, 2019 Insight
How to Accurately Assess Your IT Spend

How do you know if you are spending the right percentage of your budget on IT? It can be a tricky and deceiving line item to manage. Many companies don’t consider the risks associated with not having a comprehensive IT infrastructure in place. But how do you know what you need? Your company’s IT budget is affected by multiple variables, including protocols, compliance, current technology, and business needs. Having a complete understanding of your industry standards, current IT requirements and spend is a great place to start.

When allocating the IT budget, business leaders need to balance the requirements along with the overall needs of the business to evaluate the opportunities for digital transformation for both long term results and spend.

Today, technology is not just a business enabler. It’s a competitive differentiator. It’s important to make sure you’re at least keeping up with peers in terms of IT spending, if not seeking ways to gain an advantage through technology.

A study by Deloitte Insights found that companies spend on average 3.28% of their revenue on IT. The study also found that of high-performing companies (those that consistently outperformed the S&P), 57% increased their IT budgets from 2016 to 2017.

Benchmarking your IT spend relative to peers is a valuable exercise to make sure you’re not falling behind. A Deloitte study illustrates IT spending as a percent of revenue, by industry.

Enterprise IT has been highly resistant to change and thus forces companies to decide between acting quickly to deal with elevated risk or moving slowly to mitigate risk. But when the cost of a security breach can cost more than the value of your company, there is simply no choice but to evolve. But where do you start?

We’ll help answer some common IT budgeting questions and share insight on how to approach your IT budget.

What are you currently spending on IT?

To first understand what you need to spend you must know what you are currently spending. Many companies to do not have an exact figure on the true cost of their IT. To begin, do a thorough analysis of your IT expenses.

Your IT budget should include everything from computers and servers to software, apps, cloud services, cybersecurity web hosting, maintenance, telecommunications, audiovisual equipment, outsourcing, consulting, travel, and of course, your IT staff.

Need help evaluating the total cost of IT to your business? Contact us here for more information and a free diagnostic evaluation for qualified businesses.

Where should you focus your IT spend?

The focus on your IT spend will depend on your industry. In years past, businesses primary spend was on automating back-end systems and maintenance and upkeep of infrastructure. Today, technology investments need to align with your business goals. Your IT is entwined with every business function and has the potential to increase revenue, performance, and competitive advantage. And while there is no right place to spend your IT budget, the most common spend is on data center systems, enterprise software, devices, and communication services.

Are you comfortable with your level of IT risk?

Cybersecurity is a significant and growing IT issue. Just look at the news. Every day you can find a large company that has experienced a security breach. Most executives have a poor understanding of the risks. Do you know all of your risks?

You need a comprehensive system for managing IT risk that assesses not only the threat and cost of an attack but an understanding of how you will restore your data and get your business up and running again with minimal downtime.

Does your IT roadmap reflect the full potential of technology to improve your business?

Technology can increase revenues, reduce costs, and lower risk. By updating and staying abreast of technology advancements and mitigating threats, companies can dramatically improve their overall business outcomes.

Ultimately, the strategy that emerges from a thorough IT assessment and integrated plan should place your business goals at the forefront. An intensive, well thought out IT plan is not merely a revised annual IT budget, but a tactical plan that should provide a competitive advantage for years to come.

Spending your IT budget wisely entails IT not only provide an infrastructure to serve data but also improving your overall business. Understanding your current IT spend and how best to leverage IT for business success is key. If your company doesn’t have internal IT staff or a CIO that can evaluate solutions, consider hiring an IT Solutions Provider.