What You Need to Create a Successful IT Budget for 2022

Published on January 4, 2022

When executives and board of directors ask "Do we have a budget for 2022?" IT leadership hasten to attempt an accurate account of current systems, services, and subscriptions. Unfortunately, the continued trend is to do more with less; increase dependency on IT while allocating less to the overall budget. Many organizations fail to recognize the link between IT budget and protecting business assets or improving productivity and efficiency. This article will explain how to prepare your 2022 IT budget for success in all of these areas.

 

What is included in an IT budget?

An IT Budget is the total allocation of IT spending over a 12-month period for a corporation.  It consists of capital expenditures (CAPEX) like costs collected for the purchase of hardware, servers, and equipment. It also includes operational expenditures (OPEX), which would consist of costs for the purchase of Software-as-a-Service (SaaS) licenses, Infrastructure-as-a-Service (IaaS) subscriptions, internet, utilities, and contract-based services. 

As a whole, your IT budget should account for the costs of hardware, software, personnel, outsourcing, disaster recovery, and support services. 

  1. Hardware
    Simply put, computer hardware is the physical components that a computer system requires to function. There can be several hardware components attached to a computer system. It can include office servers, RAM, printers, monitors, hard disks, keyboards, sound systems, and more. 

  2. Software
    Computer software is the set of instructions that tells the computer hardware what to do. It is comprised of programs, routines, and procedures associated with its operation. For example, well-known computer software is Google Chrome, Gmail, Microsoft Word, Adobe Photoshop, and PowerPoint. 

  3. Personnel
    Any employee that is designated to work in the IT department should be accounted for when considering costs of personnel. Whether the employee is considered on-staff or in management- if the employee's main job is to install, upgrade, maintain, test, and troubleshoot the IT infrastructure of a company - they are IT personnel.

  4. Outsourcing
    IT outsourcing is the use of external service providers to effectively deliver IT-enabled business processes, application services, and infrastructure solutions for business outcomes. This includes technology implementation, installation, migrations, and periodic maintenance. 

  5. Disaster Recovery
    The method by which an organization intends to regain access and functionality in the case of a natural disaster, cyber attack, or even business disruptions would be disaster recovery. Consider services that are purchased or funds that are allocated to make for a more speedy and reliable recovery. These services can include cloud backups, prioritized disaster recovery of critical systems, and cyber insurance to guarantee risk management and recovery should a disaster occur.

  6. Support Services
    Any services that are used to provide technical support, and make or break services are accounted as support services. This includes managed services (IT support or "help desk") and managed security or operations. This could also include funds allocated towards new product installation services, and remote troubleshooting capabilities, and other types of proactive or reactive on-site services. 

Without an IT budget that allocates funds towards each of these components, an organization might find itself justifying every IT expenditure as it comes up, making for unnecessary overhead. In addition, it could set an organization up for shadow IT.

Shadow IT is the implementation of specific technology,  applications, and processes by individual departments instead of a centralized IT department. This often increases cybersecurity risks and decreases the sense of accountability. Coming up with an IT budget eliminates unnecessary spending and keeps your organization on track. 

 

What percentage should a company spend on IT?

On average, businesses should spend 4-6% of their revenue on IT. Various industries tend to average different percentages. From driving revenue to reducing overall costs, there's a number of benefits that a company can earn from investing properly in their IT environment.

Ultimately, the final number will depend on the company. While technology costs can seem high at times, technology can dramatically improve company performance in all areas.

 

What should be our priorities when making IT budget decisions?

Making sure your goals align with your IT budget decisions is a crucial aspect of successful IT budgeting. As you would with a personal budget, you should assess the pros and cons of each purchase. Does the business need to invest its budget into a certain innovation? Can the business afford the long-term maintenance costs of a new purchase? 

It is even more important to prioritize cybersecurity with today's ever-evolving cybersecurity threat landscape. An easy way to determine what an enterprise should prioritize when it comes to their IT environment is by taking a straightforward IT Security and Infrastructure Assessment. This helps IT managers cut through the noise and get actionable, prioritized recommendations to help: 

  1. Technology investments that improve operational efficiency
  2. Cybersecurity protections that reduce risk and organizational resilience
  3. Cloud services that enhance employee and customer experience

By embracing IT budget alignment, enterprises can achieve their revenue targets and exceed business goals. 

 

Are IT budgets increasing?

According to Gartner's IT spending forecast, IT services are expected to increase 8.6% to $1.29 trillion in 2022. Since digital transformation is a high priority for many organizations, it makes sense that IT services are becoming a high priority as well. Enterprise software is projected to have an 11.5% growth rate in 2022, which would be the highest yearly rate yet. As shown through software like Microsoft 365 and Google Cloud, prices are increasing due to licensing policy and inclusion changes like added security features as a result of cyber threats. 

These cyber threats, especially ransomware, are fueling the increase in cyber insurance premiums as well. Cyber insurance providers are seeing the increase in cyber threats and claims, taking advantage of what appears to be an emerging market. In spite of these increasing premiums, there is a hightened demand for cyber insurance. Why? Businesses want to protect themselves by mitigating risks while being cost-conscious.  Hence, why they often make the mistake of making budget cuts where they shouldn't. 

"IT budgets aren’t growing as fast as cyber insurance. For some reason, businesses keep making the same mistakes. Despite warnings of labor shortages or of salary increases, cyber insurance pricing increases, and supply chain shortages, they demand more for less budget. When businesses include a Managed Services Provider in their planning, they lock in labor rates for the future."

James Shuler, Director of Business Development at Centre Technologies.

Future-of-work investments will exceed $1 trillion globally by 2024, according to research by International Data Corporation (IDC). Because the tech landscape continues to evolve with various technologies and services that aid the workplace, IT budgets are forecasted to increase. If enterprises desire to stay at the top of their game and ahead of the competition, a well-thought-out IT budget will be the foundation to their success. 

 

let us help you create a successful it budget

If budgeting your technology investments in 2022 seems like a daunting task or you just can't take the time for it, contact a quality assurance specialist here at Centre Technologies. We can help you plan a IT budget for 2022 that aligns with your company goals and fits perfectly in your budget.

Want more information on where tech is headed in 2022? Check out our podcast, When Bits Hit the Fan. In our latest episodes, we interview CISO Anthony Leatherwood about cybersecurity and how to keep your business protected in today's dynamic threat landscape.

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About the Author

IT Consulting IT Consulting

Organizations count on Centre to deploy secure and efficient IT solutions that support business-critical operations. On an as-needed basis, Centre’s IT consulting and professional services deliver enterprise-grade solutions customized to customers’ unique business. Centre’s certified consultants design and execute a tailored IT Blueprint™ — a comprehensive plan to manage customers’ immediate needs while enabling long-term business continuity and operational efficiency. Learn more about IT Consulting »

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