How Much Should Your Company Spend On IT?

The technology budget is something that varies across industries and across businesses of different sizes greatly. A recent study from Computer Economics suggests that, in 2020, businesses recorded spending an average of 2.6% of their total revenue on their IT budget. The study only covered organizations that had an annual IT spending of more than $1 million or had over $50 million in revenue annually. Speaking in strictly general terms, IT spending increased by 3% in 2020. Data suggests that smaller businesses typically tend to spend more on technology. On an average, they spent 6.9% of its total revenue on IT.

The technology demands of the different facets of running a business are only intensifying. Meeting demands from customers, patients or clients, monitoring supply chains and coordinating with vendors and service providers effectively, while managing the internal demands of Human Resources, marketing and strategic growth is no mean feat. The IT infrastructure is your business’ backbone to meet these diverse needs and demands. That is why it is crucial for you to pay attention to budgeting your IT environment just right. Without paying close attention to your IT budgets, you could accidentally trigger a whole daisy chain of impact across your network and potentially render it more vulnerable. However, ascertaining the right budget for IT is often a challenging and confusing task for businesses. Apart from budgeting, separate allocations for hardware, software, data storage and ongoing support can also be tricky. Moreover, as costs of in-house IT management goes up, more and more companies are forced to consider if they should indeed manage their IT in-house, or outsource it with the requisite tech support and data storage and backup requirements? In this article we will try to simplify the process of IT budgeting and address the concerns for small businesses to help them understand if they are spending the right amount on their IT. Managed IT Services specializes in IT cost reduction for SMBs.

What Do You Need from Your IT?

While embarking directly on deciding your IT budget may be tempting, you should first take the time to step back and understand exactly what you’re trying to achieve with your infrastructure. This is one answer that will be unique to every business. And this will also be the reason why your IT strategy may well be entirely different from your competitor. Many SMBs also rely on experts from managed IT services providers in order to decide on their IT budgeting strategy. The next step should be to jot down your short and long-term business goals and how your technology and infrastructure can play into achieving those goals. Consider what you need your IT to do in terms of improving efficiency and productivity for your business. Some of these issues could include minimizing downtimes, ensuring more seamless and efficient operational processes, ensuring the security and integrity of business and customer data, enabling digital transformation across your network, migrating to the cloud for storage, operational scalability and flexibility, backup and business continuity needs, and ensuring streamlining of your entire business process in order to minimize inputs and maximize returns and growth. Learn more about, What does an IT Support Company Do?

Top Trends in Small Business IT Spending

Finance and accounting software

Many businesses, especially SMBs, lack access to reliable accounting staff. This is where technology can come in handy to bridge a major skill gap through highly efficient financial software. For maximum IT cost optimization, consider reaching out to IT Outsourcing Services.

Cloud computing

SMBs must make use of cloud-based technical tools as its democratic potential allows them to function at the level of their much larger peers without having to bear the burden of upfront infrastructure costs. This also allows companies to get rid of recording significant costs such as maintenance and upgrades. Moreover, subscribing to cloud managed services is easy and allows for deep customization where you only pay for what you actually use. This helps keep costs predictable in the long run.

Data security

With intensifying cyber-attacks and more stringent privacy regulations, data security has become a primary concern for businesses of all sizes. However, there is a persistent myth that only large corporations have the deep pockets required to invest in security. With the right technical tools for privacy and cybersecurity guidance from managed security provider experts, SMBs can have an equal or even better security stance than their corporate counterparts.

Digital marketing

This is an often overlooked area, but while budgeting for your IT needs, you do need to keep in mind that at some point you will need to employ digital advertising tools for growth. Check out Digital Spotlight.

This means having an ad budget and putting aside technology expenses for a website to direct all your traffic to as well as invest in Ecommerce, CRM etc. IT cost management is as much an art as a science. For proper guidance on this, please consult IT support 24/7.

Key points to keep in mind when budgeting for IT


They should be a no-brainer. You need to carefully evaluate all your hardware needs for your infrastructure including computers, phones, cloud services, and general or specialized equipment you may need.

Software and services

You need to take into account all the software and services you may need to use. This could be a combination of in-house software licensing and software provided by third-party service providers.


Your website is pretty much your brand identity on the web. It’s critical for businesses to secure their domain names, find the right hosting service, developer, and focus their energies on creating and maintaining the website.

Internet service

Although this can be captured under operational expenses as well, many companies choose to keep it under the ambit of IT.

Marketing and advertising

With marketing going increasingly digital, promoting your business will require digital tools and smart data gathering systems.

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