As small businesses in the U.S. budget for IT in 2020, there are a number of variables to consider. In this post we’ll look at:
• Capital vs. operational expenses
• Software purchases, subscriptions and licensing
• Contracts for telecommunications and Internet services
• Support and maintenance
By virtue of the ever-increasing changes in technology, many businesses are seeing the need to increase their IT budgets in 2020.
According to data compiled by Spiceworks, 44% of businesses plan to increase their IT budgets in 2020 by an average of 18% year-over-year, with the bulk of this increase being spent on hardware, software, and cloud computing.
As far as spending per sector on IT, the latest data per Deloitte showed the following breakdown of spend rate as a percentage of gross revenue:
• Banking and securities: 7.16%
• Business and professional services: 5.82%
• Education and nonprofits: 5.77%
• Travel, media, and hospitality: 4.39%
• Technology and telecommunication: 3.73%
• Health care services: 3.49%
• Consumer business and retail: 2.04%
These are among the largest sectors and largest spenders on IT, but what about the average small business? By projecting that a small business in the US spends at the national average IT spend rate, it would spend 3.28% of its projected revenue on IT in 2020.
Spending this budget amount in proportion to business needs is critical to maximizing the benefits of IT spend for your business. While being a relatively small percentage of the budget at 3.28%, it’s a very important determinant of the speed and efficiency of your business’ daily operations.
There are a number of important considerations that go into IT budgeting.
As small businesses review their projected IT spending in 2020, both capital and operational expenses must be budgeted for.
Capital expenses might include such items as new laptop computers for new employees or remoter workers, new desktops for office-based employees, and new smartphones for mobile employees, such as salespeople and service technicians.
Monthly operating expenses include any IT expense needed on an ongoing basis, such as software subscriptions, licensing, and maintenance. Licenses paid monthly might include such services as Zoho, QuickBooks Online, Office 365, GSuite or Microsoft Azure. (These are known as SaaS – Software-as-as-Service)
Project based IT spend could be counted as a subset under capital expenses, and might include such items as training employees on new software or migrating off older technology platforms and cycling in new ones.
The need for fast and reliable voice and data communications has never been greater. Contracts for telecommunications and Internet service providers will need to be part of the monthly operating expense category. This is a very important monthly expense and should be sufficiently funded so top-tier providers can best provide for this need.
Murphy’s Law pertains to IT as much as any other function. Hardware and software glitches always seem to occur at the least opportune time. Having trained technicians, either in-house or from the outside, is also an important budgetary consideration in the IT support and maintenance category. Ongoing training of IT staff is also a very necessary part of the IT budget.
A small businesses lifeblood is not only it’s people, it’s their ability to effectively move information both internally and externally. Adequately budgeting for IT is critical to assure that this communication and information processing can be done quickly and reliably. The IT budget needs to be one area that is continually reviewed to fit the needs of the business, allowing companies to most effectively process information as the speed of change increases.