How much should you spend on IT?
By Alan Bauman
It’s a question we are asked all the time. And we get that spending money, in ways that are unnecessary or inefficient, is probably not a great idea. But spending too little on IT can lead to business pain, lost productivity, or worse. In our experience, failing to realistically budget for IT is perhaps the single most common mistake that businesses make in their thinking around technology.
And of course, that’s no surprise. Business leaders are not generally technologists. They lean on technology, but they have other, more important, things on their mind. Often, when we receive a call from a prospective client, they’ll be motivated to pick up the phone because of some sort of IT failure. Perhaps a backup failed at a critical time. Or maybe they’ve suffered through a security breach. Almost without fail, they view the problem as simply failed technology. But the failure at hand, is almost always a symptom of a larger problem. And that problem is the sum total of their processes, best practices, people, and systems that touch IT. And ALL of that is driven by budget.
Whether you handle IT with an in-house team, outsource, or have a blend of the two, lack of IT budget presents enormous risk. And often C-level executives don’t adequately perceive that risk. Because the real issue isn’t a failed server. It’s how that failed server impacts your ability to serve your customers. It’s how the lack of strategic planning causes reduced productivity or frustrations with your staff. It’s the turnover you experience when people get tired of fighting with IT systems that have not been maintained or refreshed on a planned cycle. It’s the lost business that you never hear about when a client-facing system fails or is simple outdated and presents your business in a poor light.
Forward-thinking business leaders have come to understand that adequately spending on IT is not optional. And the costs around technology are not going down. The move to “cloud” technologies has not made the need for support, planning, security, and proper proactive systems management go away. In fact, the added complexity of a hybrid IT world has, in some cases, made things even more complex requiring silos of expertise in many areas.
So how much should you spend on IT? Including the advanced security and threat protection services that are becoming an essential part of what organizations need to deploy simply to keep the lights on the operational costs around core IT range between $150-$200 per seat per month. Here’s the math: take your employee count (assuming all touch technology) and multiply by $200 and you won’t be far off of a reasonable operating budget. Add to that a budget for a continuous evolution of your systems -think new devices, servers, new hardware, security tools etc of (over time) about $50 per month per seat. Add these two together and you would not be wildly wrong to budget $250 per month per employee for core IT. If you have a 50 person company that’s about $12,500 per month.
If you’re used to spending little on technology; or only spending when something breaks (or when you’ve lived with enough pain for a long enough time); this probably seems like a lot of money. But when you put it into the context of all the other costs you have around running your business, the truth is that whether you spend $25,000 a year or $75,000 a year on IT is probably not nearly as important as the results you get from those dollars.
When I share this math with prospective clients, sometimes I’ll hear something like “We don’t need the Cadillac. A Chevy is fine for us.” The reality is, it’s more a question of a fully functioning car vs a car that’s missing a steering wheel and has a few flat tires. 😊