How Much Should My Company Spend on IT?

Businesses are preparing to exit one of the most challenging calendar years in recent history, with uncertainty still looming on the horizon. As budget purse strings get pulled tighter, it’s prudent to take a close look at what you’re set to spend your budget on and whether you should adjust your approach to your IT accounting bottom line.

In this blog, Apex Technology provides guidance on trends in IT spending across industries, with a breakdown of how much of your budget should be dedicated to IT and how that share of the expenses should be allocated.  

 

Gartner Predicts IT Spending Is Back On the Rise

Prior to the outbreak of the COVID-19 coronavirus, worldwide IT spending had reached upwards of $3.8 trillion in 2019. With the pandemic causing massive international quarantines and some markets shutting down for months at a time, IT spending took a dive in 2020 by more than $200 million internationally. Gartner predicts a rebound of IT spending in 2021 and subsequent years, in part due to the success of Cloud solutions during the pandemic providing companies with long-term flexibility in times of uncertainty. Because companies have more need for technology and limited to no growth in revenue to support it, Gartner’s research also showed that budgets were being revised to redistribute funding from other line items towards IT spend.  

How Much is Enough When it Comes to Budgeting for IT?

With business size and industry being primary drivers and influencing factors, the percentage of revenue that businesses spend on IT ranges from 4% for medium-sized businesses to upwards of 6.9% for small businesses. 

More IT spend doesn’t necessarily guarantee business success. In fact, it’s the businesses that are more conservative and intentional with their IT spending who end up operating more efficiently. These companies avoid large and bloated IT projects with complicated scopes and focus instead on lean, agile projects built for rapid return on investment.  

Managed Services Push IT from Cap-Ex to Controllable Costs

Historically, IT costs have fallen largely under capital expenditures and payroll, as you’d have to have the staff onsite to manage complicated and complex premise-based IT infrastructure. Expensive servers, complicated licensing that had to be managed and maintained, and evolving hardware needs all came together in the form of a significant and hard-to-anticipate portion of the budget. 

The modern managed services IT approach allows businesses to push all of their infrastructure into a cloud maintained by the service provider and software into flexible arrangements allowing clients to pay only for the services and bandwidth they use. Because IT as a service flexes according to business requirements and can scale up or down, the costs shift to the controllable monthly costs line and over time become much more affordable. No longer are you paying bulk for services or hardware and ending up with an inflexible and unresponsive budgeted approach. IT costs can now adjust and flow with your organization’s revenue stream and staff size. 

Managed IT Service Solutions for Small Businesses in Charlotte

Charlotte is one of the fastest growing cities in the United States. As a financial hub on the East Coast, the city is home to some of the largest, most competitive financial institutions in the United States. Competition amongst the giants creates a highly competitive local economic landscape for small- to medium-sized businesses trying to fill the B2B service needs. For all of your managed IT services needs, reach out to the experts at Apex Technologies and learn how to reduce your costs and maximize profitability to your bottom line.