Currently struggling to cut your IT budget or risk losing your staff? Or are you currently looking for ways to maximize your current IT budget but don’t know where to start?
You’ve come to the right place.
In this guide to maximizing IT budgeting, we’ll discuss some actionable ways to shrink your IT budget without sacrificing progress, but we’ll start from the basics.
This article will cover:
- What is IT budgeting?
- Different categories in an IT budget you should consider
- Actionable tips for maximizing your IT budget
- Mistakes to avoid when planning your IT budget
And more.
Without further ado, let us begin right away.
IT Budgeting: The Concept
IT budgeting is, simply put, the process of allocating financial resources to an IT project (or multiple IT projects.)
The most basic of the IT budgeting process involves creating a wish list of funding for purchasing products and services needed to achieve the IT department’s objectives. However, it also involves evaluating the cost of IT assets and services, estimating income, determining what products/services the business should produce, setting finance priorities, and deciding where your hard-earned money should be spent.
In today’s technology-driven business environment, IT budgets are often a reflection of the whole company’s financial strategy.
Different IT Budget Categories
Below, we will discuss the various broad categories an IT budget should cover.
Obviously, every company and every IT project is unique, and requirements may vary by industry, company, and even by project. However, most IT budgets should include the following categories:
1. Hardware
Hardware here refers to all devices and systems in use in the IT project, including but not limited to desktop computers, servers, laptops, tablets, network devices (i.e., routers, switches,) mobile devices, and so on, up to the smallest hardware devices like flash drives.
Hardware investment and maintenance are typically the biggest elements in an IT budget, and also often the most challenging to optimize.
2. Software
Due to the presence of SaaS products with subscription-based models, software expenses are a little more varied. Software costs include the cost of purchasing one-off licenses, upgrading existing software, and recurring subscription costs. In some cases, any cost of support (i.e., mandatory training costs) should also be considered as software expenses.
3. Human resources
Human resources costs Include the salary, benefits, bonuses, and allowances to hire your IT department staff, onboarding/training costs, and recruiting costs. If you plan to outsource some of your IT department’s responsibilities to external vendors and/or consultants, then the cost should also be included here.
4. Support and maintenance
Expenses in this category include the salary, allowances, bonuses, and benefits of your internal support staff. If you use any external vendors or consultants to provide support, then the expenses should also be included here. Support costs may seem small and routine, but they can add up to be a significant part of the IT budget.
5. Network and connectivity
Most businesses now depend upon an internet connection, and a comprehensive IT budget should consider all the expenses related to your connection to the internet, including backup connectivity.
6. Backup
This refers to the cost of keeping your IT department (or your company) running in case of a disaster.
This may include the cost of backup and recovery services, disaster recovery plans, and so on.
Companies have the option to pay for a third-party backup solution or keep their own backup. However, for the latter, the company will also need to consider maintenance costs to ensure the backup hardware is stored in a safe location and is always in perfect working order.
7. Contingency and redundancy
This cost will allow you to pay for unexpected expenses that may come up for one reason or another. If you don’t budget for contingency, you may end up needing to make adjustments here and there throughout the budget’s timeline, or it may cause you to constantly go over budget.
Maximizing Your IT Budget: Actionable Tips
How can we make the most of the available IT budget without negatively impacting your growth and progress?
Above anything else, you must plan your budget, and you must plan it well. Let’s take a look at some tips on how you can maximize your budget without hindering progress:
1. Make the most of your current technology assets
Too often, companies make unnecessary investments in technologies despite already possessing similar assets in the company.
Don’t make the same mistake, and here are some simple steps you can take to make sure you are maximizing your current assets:
Step 1: Audit
Make an inventory of all the technology assets (both software and hardware, on-premise and cloud-based assets) you’ve paid for.
- Do a company-wide audit and try to list everything. Your on-premises hardware, software installed on servers and on-premises devices, and cloud-based software you’ve purchased/subscribed to
- Review the previous OpEx (Operating Expense) budget (if any) to re-check planned technology expenses and subscriptions.
- Compare them to your actual spending records to check what technology assets you’ve paid for (including subscriptions). Confirm that all amounts are accurate.
Step 2: Reconcile and eliminate redundancies
Reconcile technology assets across departments to eliminate redundancies:
- Check for unused hardware solutions. Can they be moved to other departments or reused?
- Assess the possibility of selling, reusing, or recycling each unused hardware asset (more on this below)
- Check for any duplicate and/or redundant software assets. For example, if two departments use different CMSs, is it possible to reconcile the situation, so both are using a single CMS software?
- Check for any unused software and return the license or stop the subscription. This can help eliminate not only the subscription or license cost, but any tied maintenance or training fees.
- For software solutions with user-based licenses, check whether there are licenses that are still tied to terminated/transferred employees or anyone who no longer needs to access the software. Reconcile these licenses.
- Assess the possibility of consolidating multiple individual licenses into a volume pricing if the software vendor allows. This may allow your organization to lower the cost of the respective software.
Step 3: Maximize usage
- Keep your technology solutions (both hardware and software) up to date with the recent updates. This is important not only to ensure optimal functionality but also to eliminate potential security vulnerabilities.
- Ensure there are enough training programs for staff and operators so they know how to optimally use software and hardware assets.
- If you feel you need more features/functionalities from your assets, discuss with the vendor about your options.
- Discuss the possibility of getting higher-tiered plans with discounts
- Discuss the possibility of getting custom-tailored features. If it’s possible, don’t forget to assess the timeline of when this new feature could be implemented.
- Make sure there is an updated system documentation/guidelines with the addition of new features to help with training your staff.
2. Sell, reuse, or recycle unused hardware
No matter how careful you are and no matter how well-maintained your device is, every piece of hardware will ultimately need to be replaced.
Sometimes, replacing or upgrading a device can be quite costly, and this is why maximizing the value of your old/used IT asset is very important to maximize your budget.
In general, for each piece of used hardware, you have three main options:
- Sell: if the IT asset is still in good/functional condition and still has a relatively high resale value, then the most viable option is to sell this asset to help finance the upgrade/replacement.
- Reuse: if the IT asset is still functional but it has low resale value or if you aren’t willing to sell for one reason or another (i.e., data security concerns,) then you can repurpose the device to reduce your future investment.
- Recycle: if the IT asset has low value and/or you don’t want to sell it, then the last option is to recycle the equipment. Sometimes you can make a bit of money from recycling your old hardware, but the main purpose of recycling your equipment is to free up space and also to securely eradicate your data.
Selling your used IT equipment to maximize its value should be your priority in most cases. However, data security and privacy are often a concern, especially for IT assets that store data (i.e., servers with hard drives.)
With that being said, here are a few actionable tips on how to securely sell your used IT assets:
- Determine the appropriate price range. First things first, determine how much is the appropriate resale value of your used IT equipment. Fortunately, nowadays, you can simply check out online marketplaces (Amazon, eBay, etc.) for similar listings to check current market prices for your equipment. If necessary, you can get help from a professional appraisal, especially for more difficult items.
- Find out whether you’ll need secure data eradication. Depending on your location and/or your industry, you may be legally required to perform secure data destruction before you can sell or dispose of the equipment. Yet, even when not mandated by law, businesses should think seriously about secure data eradication since their competitors may be able to use leaked data against them.
- Finding your buyer. Next, identify whom you can sell your equipment, and in general, you have three different options:
- Finding your own buyer. For example, by advertising your items on Craigslist or offering it around to your peers. Here, you get the most freedom in setting your price and terms, but you have to do everything by yourself, including the secure deletion of your data. Not to mention, finding the buyer may not be easy and could take some time.
- Listing your equipment on online marketplaces. Like eBay, Amazon, or other online marketplaces in your country/location. In this option finding your buyer would be easier, but you’ll also get less freedom. You’ll also be responsible for secure data deletion and packaging your items.
- Selling to specialist IT asset disposition companies. Selling to specialist ITAD companies like Big Data Supply Inc. means they’ll do everything for you, including secure and certified data eradication. If you are selling in bulk and/or if data security is a concern, then this should be the most viable option for you.
- Provide detailed information. Regardless of which channel you choose to sell your equipment to, try to provide as much information as possible. The more information they have, the more likely your potential buyer will make an offer. If you are selling to an ITAD company, comprehensive information will also help them provide an accurate and fair offer. List information like:
- The equipment’s brand, type, model, etc.
- Put pictures of the serial number, model name, etc.
- Age and how many operating hours it has seen
- Repair history (if any)
- Post pictures of any signs of war and/or defects (if any)
- Research buyers before selling. Regardless of the type of buyer you’ve found, you should properly research them before confirming the sale. This is important to prevent any potential fraud or other issues. Verify the legitimacy of the potential customer and (if any) read online reviews or testimonials about their businesses.
3. Explore the option of purchasing used equipment
Still related to the above, while indeed purchasing used IT equipment can be risky, If you can find the right seller and the right items, it can save you a significant chunk of money without sacrificing too much performance.
Again, purchasing from a reliable ITAD company like Big Data Supply Inc. can help. You can browse Big Data Supply Inc.’s online shop and check for any bargain that may suit your needs.
There’s an unconditional 90-day guarantee for any tape products and a lifetime product warranty for any data media products, so any defective items will be replaced free of charge. Meaning, you don’t have to worry about purchasing something that fails just a few weeks later.
Not to mention, purchasing used provides a way to be a more responsible consumer. At the very least, consider purchasing items that don’t store any data and/or are less likely to be easily broken, like cables, switches, access points, or network switches.
4. Virtualize when possible
Instead of upgrading aging hardware assets (i.e., servers, laptops, etc.), explore the possibility of going virtual.
Recent developments in cloud technology have made virtual desktops, virtual servers, and other virtual/cloud solutions to be more affordable and reliable than ever. Replacing your hardware with virtual assets will allow you not only to reduce/eliminate costs you’ll otherwise spend on hardware, but you’ll have easier troubleshooting (often with 24/7 tech support) and faster/more reliable backups.
At the very least, you might want to prioritize virtualizing your servers, which offers the highest pound-for-pound benefits in most scenarios.
5. Prepare emergency hardware replacement fund
Unfortunately, all hardware eventually fails.
No matter how well-maintained your equipment is and no matter how careful you are using the device, you will eventually need to replace it, and sometimes it can be quite costly to replace.
If you don’t have a contingency fund for hardware replacement in your budget, you’ll exceed your budget in one way or another, or probably you’ll need to sell some other pieces of equipment or lose your staff in worst-case scenarios.
So, make sure to have an emergency fund for hardware replacement wrapped in your budget. While it will add up to your initial budget at first, it will save you from needing to spend much more later.
Also, with a slightly lesser degree of importance, prepare a fund for upgrades (for both software and hardware assets.) This way, when there’s a sudden and/or pressing need to upgrade your outdated asset—or when there’s an opportunity to upgrade for a discounted price—you have an available fund to spend.
6. Prepare funds to expand staffing needs
You should plan your budget with positive expectations in mind that your business is going to grow.
As your business and/or IT department grow, however, you’ll also need to expand your IT staff and probably invest in new hardware and software assets.
Problems related to growth and expansion are always good problems to face, but still, it’s best to prepare for them.
Hiring and training IT talents, as we know, can be very costly, so it’s important to make adequate room in your budget to accommodate an expanding team.
Depending on your business’s preferences, however, it’s possible that staffing costs belong to HR’s budget rather than IT’s. Even if that’s the case, you should supplement this fund with related funds like additional software licenses, desktops, etc.
Common mistakes to avoid in planning your IT budget
In this section, we will discuss some common and critical mistakes to avoid:
Not considering hidden costs
It’s no secret that IT expenses are very challenging to estimate due to various hidden costs that might occur.
When planning an IT budget, it’s crucial for IT managers to look beyond the initial cost of the expense (i.e., a hardware investment) and carefully investigate potential hidden costs.
For example, when investing in new software, is there any mandatory training cost? When buying new hardware, would there be additional costs incurred from maintaining it in the future? Would you need to spend more to train the staff who will use it?
The best method to handle these hidden costs is to simply prepare a contingency fund, around 15%-20% on top of the budget.
Delaying upgrades and/or replacements
While at the surface, delaying upgrades and replacement may save money in the short term, it can hurt your long-term budget in several ways:
- Keeping obsolete hardware or software solutions that are no longer supported by their vendors may result in security vulnerabilities. When your business is affected by a DDoS attack or a data breach, the financial implication can be much more expensive than upgrading your assets.
- Productivity losses due to hardware failure or slow performance can add up and may cost you a lot more than the otherwise upgrade/replacement cost.
Instead, treat your IT budget as a long-term investment, and plan funds for upgrades and replacements for both your software and hardware assets.
Inadequate investment in training your people
Failure to utilize hardware and software assets to their utmost potential can hurt your overall investment and, if you’re not careful, can result in losses. For example, if an employee falls victim to a phishing scam due to a lack of training, it can hurt your business financially.
It’s crucial to carefully determine whether you’ll need to allocate more funds to training and people development to support your initiative in improving productivity.
Not doing a yearly budget audit
Even if you’ve already got a fairly effective budget from last year, remember that IT is a very dynamic field. Year by year, you should take various changes in the business and in your industry into account when planning your budget.
Carefully consider various factors that can affect your IT needs compared to last year: changes in the company’s structure, new trends in technology, new competitors in the market, etc.
It’s best to audit every aspect of your last year’s IT budget before planning a new one (or rolling over this existing budget.) This way, you can understand where you need to make changes and how to fund this year’s operations better.
Forgetting the importance of cybersecurity
Especially during the global pandemic, there has been a massive increase in cyberattacks all around the world targeting all kinds of businesses.
Thus, when planning your IT budget, not prioritizing cybersecurity is simply no longer possible.
At the very least, investing in cybersecurity can prevent you from any financial implications due to successful cyberattacks. Thus, it’s important to treat cybersecurity as a long-term strategic investment, not only as a defensive measure.
Although IT budgets are tighter than ever, not including cybersecurity is simply not an option.
Conclusion
Planning an IT budget is often difficult, and maximizing the budget can be even more challenging.
You need to carefully consider many different factors before you can successfully maximize your IT budget utilization without sacrificing performance and productivity. However, although it’s difficult, by following the tips and strategies we’ve shared above, you can start planning and optimizing your next year’s IT budget for success.
