How To Budget For IT

IT Consulting IT Planning & Recovery Managed IT

For your business to stay competitive, establishing an effective and efficient IT budget is essential. It goes without saying that your business depends on technology to survive, but your budget is also a tool to optimize available funding and allocate it in a way that supports your overall IT strategy. Budgeting effectively will save time and money spent on unplanned IT needs that inevitably arise in the absence of a transparent and well-thought-out plan. The process of creating a budget should help you identify deficiencies and reduce waste, as well as forecast, prioritize, and justify strategic IT expenditures. Your budget shouldn’t just be an IT “wish list.” It should serve as a blueprint to ensure funding for initiatives that align with your company’s long-term goals. 

So how do you go about creating an IT budget? 

Identify Your IT Inventory

Efficient budgeting begins with a comprehensive assessment of your current IT resources, including an inventory of hardware, software, network infrastructure, services, subscriptions, and staffing. Identifying your existing resources (along with your technical debt) is fundamental to budgeting for the future. Previous budgets can serve as a baseline and a tool–learn from the past, but don’t be afraid to make changes to support evolving business goals.  

Set Clear IT Objectives

Now that you have a clear picture of what you have to work with, it’s time to establish your IT objectives. What do you want your technology to achieve in the coming year and beyond? Your objectives might include enhancing cybersecurity, upgrading hardware, improving customer support systems, or implementing new software. A careful examination of previous years’ budgets likely brought to light areas of overspending and technical debt. Setting clear objectives will make it easier to trim fat and allocate funds more effectively.  

Prioritize and Justify IT Initiatives

Which IT investments are essential and which are nice-to-haves? Are there significant projects in the coming year that require technology upgrades or additional IT support? Spending should be prioritized to reflect the objectives you’ve set. Be prepared to clearly communicate your IT strategy, its impact, and the projected ROI of your initiatives. Present a cohesive plan and be able to articulate how your proposed budget will support overall business goals.  

Allocate Resources To IT

Divide your IT budget into categories, beginning with ongoing expenses. This should include the following: 

  1. Hardware: servers; computing equipment, for in-office and remote workers; and network infrastructure
  2. Software: subscriptions, licenses, and support contractss
  3. Personnel: both employees and outsourced staff, and expenses related to recruitment
  4. Security: cybersecurity should be a significant component of your IT budget. Security threats are ever-evolving, so allocate funds for regular security assessments, employee training, and the implementation of robust security tools. 
  5. Training: employee training is often the first thing to go when budgets get cut, but knowledgeable employees are essential to maximize the value of your tech investments.  

Your project-specific expenses should also be outlined in the same way, including any consulting fees, contract staff, and administrative costs, along with additional office space, hardware, and software required. Be realistic about costs and allow some wiggle room for unexpected expenses that may arise. Identify future investments needed to support your overall IT strategy. Leave room in your budget for scalability, including necessary upgrades and expansion of IT support staff. 

We coach our customers on the 2-3% rule for IT budgeting. If you are trying to maintain a steady state, budget 2% of your top line revenue to go toward IT. If you are looking to grow, changing business strategies or preparing for a large change in your company, budget 3%. Of that 3%, ~50% should go toward managed services and labor and ~50% on cloud licenses, your internet service provider and new hardware. 

Leveraged Managed IT Services

Outsourcing some of your IT needs to managed IT service providers can help control costs and ensure you have access to expert support when needed. Proactive monitoring and network maintenance will reduce unexpected spending and provide peace of mind.  

Budgeting for IT isn’t just about managing expenses. It’s about investing strategically to drive business growth and improve efficiency. Your budget ensures that your technology aligns with your business goals. A well-structured IT budget is your roadmap, and a vital tool for success in the digital age. 

Related Posts

Technology isn’t just a tool–it’s the backbone of your business operations. From managing your network infrastructure to safeguarding your data and enhancing productivity, effective IT support is crucial. The benefits to partnering with an experienced IT service provider–one who is invested in your company’s long-term success–are numerous. 

The Nessit team had the pleasure of attending the Small Business Expo in Miami recently, where we got to meet and talk with lots of business owners about all things IT. Here are the top questions we heard from small business owners, and our answers! 

1. What Exactly Does an MSP Do?

Whether you’re a small startup or a large organization, your Managed Service Provider (MSP) acts as your go-to IT partner. Your MSP’s comprehensive services are designed to keep your technology running smoothly and securely. Strategic guidance, proactive monitoring and maintenance, and round-the-clock support are all part of the package. A provider can offer solutions about how to better leverage your existing technology and make recommendations about cost-effective upgrades and improvements. Your MSP essentially becomes an extension of your in-house team, ensuring that your IT infrastructure aligns with your business goals and objectives. 

2. Why Do I Need IT Support?

Having proper IT support for your small business can prevent costly downtime and cyber threats and maximize efficiency and scalability. IT support is the cornerstone of your company’s success. An effective Managed Service Provider will handle your organization’s tech issues as they arise, optimize your infrastructure, and safeguard your data. As your business grows and evolves, so do your technology needs. With the right MSP by your side, you are free to focus on what you do best and leave the complexities of IT management to an expert. 

3. I’m just getting my business started. What should I be doing now to prepare for an IT partnership as I grow?

As you lay the foundation for your new business, now is the perfect time to start thinking about your IT strategy. Begin by assessing your immediate and future technology needs. Outline your business’s growth objectives and identify potential pain points. Partnering early on with a Managed Service Provider will ensure that your systems are optimized and save you time, money, and headaches in the long run. Your MSP will help you scale your business as it grows and support you on your journey from startup to long term success.   

4. I have an IT provider, but it’s an informal partnership. What should I be asking them?

If you already have an IT provider but feel like the partnership lacks structure, support, or accountability, you should address your concerns head-on. Schedule a meeting to discuss your expectations, service level agreements, and areas where there’s room for improvement. Ask your provider about their approach to proactive maintenance, the typical response time for support requests, and their plans for scaling your technology as your business grows. Transparent communication and clearly defined expectations are essential to a successful IT partnership. 

5. How can a great MSP help my business grow?

A great MSP is a strategic partner who is invested in your company’s success. Your provider brings expertise and industry insights to help your business grow in many ways. 

  • Increased Productivity – Proactive monitoring and maintenance will keep your systems running smoothly, minimizing downtime and improving overall productivity. 
  • Robust Security – Cybersecurity solutions and round-the-clock monitoring, as well as regular vulnerability assessments and technology updates, will ensure your data and assets are protected from cyberattack. 
  • Scalability – As your business grows, an MSP provides scalable IT solutions that grow with it. With an IT strategy in place, your organization will be able to adapt to changing needs and new opportunities. 
  • Cost Savings – By outsourcing your IT management to an MSP, you reduce overhead costs associated with office space and equipment, hiring and training in-house staff, and reduce the likelihood of unexpected tech expenses. Your provider can help your company leverage its existing technology and propose cost-effective IT solutions. 

Partnering with a Managed Service Provider is a strategic investment in the future of your business. Your MSP will streamline operations, enhance security, and provide solutions to enable growth and innovation, while increasing productivity. You’ll have peace of mind knowing your IT management is in experienced hands, so you can focus on what matters most–your thriving business. 

Talk to Nessit about how we can help your business succeed with our Managed and Co-Managed IT services

In the tech world, it’s easy to overlook the human connections that drive successful business relationships. At Nessit, we believe in the power of partnerships. We know that every client is unique and there are no one-size-fits-all solutions when it comes to IT. That’s why we take the time to really get to know our customers, to learn about their current IT issues and long-term goals. We want to understand a business inside and out before we propose a solution. 

When a Portsmouth, NH engineering firm approached us in late 2022, they had 50 employees and were spending roughly $500,000 annually on their IT. They were unhappy with their current managed service provider, and the systems they had in place weren’t compatible with their organization’s workflow. It was clear to us that a deeper dive into their operations was needed, and a thorough audit confirmed that they were spending far too much on IT. We learned that their previous provider had steered them toward a full migration to the cloud, a cookie cutter approach that isn’t right for every business. Their cloud infrastructure was set up to mirror a traditional office model, which proved ineffective and inefficient. Their work required a very specific approach to IT systems, and we knew that to come up with a solution we had to ask the right questions and get creative. 

We began with an in-depth conversation to understand the challenges they were facing, from both an employee and a management standpoint. This helped us uncover several ways we could help them improve productivity while reducing their spending on tech. This client uses engineering-specific software that allows multiple employees to access and work on the same files and drawings at the same time. These massive files include “parent” files that link to hundreds of other dependencies, which we’ll call “child” files, that pertain to a specific aspect of the project (electrical systems, sprinkler systems, etc.). Their former MSP hadn’t considered file size when setting up the network, and employees were frustrated by the long download times that hampered workflow. 

We also found that some of their existing technology, like project management software, wasn’t being used at all. We recommended that the company purchase engineering grade laptops, and to better leverage their current cloud software including Microsoft 365 which they were already paying for. We worked with them to come up with a more secure, cost-effective storage solution, moving files from an on-prem cold storage server that wasn’t backed up, to SharePoint. Our team reworked the remote management model of future machines, making the onboarding process smoother and faster for new employees. 

The client was also unhappy with the level of customer service they were getting from their provider–a smaller company who had recently been bought out by a large corporation. We assured them that this would never be the case with Nessit. We value personal connections with our clients and cultivate relationships that go beyond the transactional. When our customers get in touch, they already know the person on the other end of the phone. Whether it’s about a technical glitch or a strategic decision, they have a trusted ally ready to offer personalized guidance. 

A commitment to understanding our clients’ unique needs and challenges and designing customized solutions sets Nessit apart. By thinking creatively, we were able to tailor an IT solution that aligned with this engineering firm’s specific needs and goals. As a result of our partnership, the company has been able to save $200,000 a year on technology costs, while at the same time boosting productivity. We were able to leverage, rather than replace, many of their existing tools, and successfully transition to a hybrid model that made more sense for them than the one-size-fits-all fully cloud-based infrastructure. The business has been appreciative of our reliable support, and the peace of mind in knowing we’ll always have their back. We look forward to a long-term partnership and to celebrating their ongoing success. 

For Nessit, IT management is a partnership and our clients’ success is our success. 

If you think your IT could be more cost-effective, structured more efficiently, or you’re looking for better overall support for your team and your business, let’s talk

No matter what industry you’re in, effective IT management is critical to your organization’s success. Day-to-day operations hinge on having an accessible, reliable, and secure IT infrastructure. A failure in just one area can have severe repercussions for your business in terms of productivity, profits, or reputation. Achieving peak performance from your IT systems means more than just investing in the latest technology or services. Forward-thinking companies recognize the importance of having a future-proof IT strategy in place, and both co-managed and fully managed IT services can provide an effective solution for your business.  

So what’s the difference between co-managed and fully managed IT?

Having co-managed IT services will complement your company’s existing IT department and shares responsibility for infrastructure management. An effective provider brings expertise and a wide variety of experience with situations that your in-house team may not have been exposed to. In this collaborative model, your provider shares reporting, pre-configured management and automation tools, documentation, and processes that enhance your in-house team. Co-Managed IT is ideal for organizations looking to augment their existing IT capabilities and team, for businesses seeking help with a transition, and those that require more flexible resource allocation.  

A Fully Managed IT service provider assumes all responsibility for managing, monitoring, and maintaining your company’s IT infrastructure, removing the need for an internal IT department. An advantage to Fully Managed IT is that it provides a single point of contact for your business, eliminating the responsibility of maintaining vendor lists, negotiating pricing, and evaluating technical capabilities for hardware and software purchases. With strategic, long-term planning, your service provider will make sure that your technology can scale as your business grows, and that systems are optimized to support your business goals. Ideal for smaller companies, a Fully Managed service allows you to focus on your core business, and cuts the costs associated with employee training, salaries, benefits, and office space. IT expenses are predictable and can be budgeted for with Fully Managed services, reducing costly surprises.  

Shared Benefits of Co-Managed and Fully Managed IT Services

Proactive Maintenance and Updates – Your service provider will ensure that your network and infrastructure are always up to date and that new technology is integrated seamlessly. As a strategic partner, they can offer unbiased advice about technology upgrades and investments to better support your business goals. The service will also take a proactive stance, actively monitoring and addressing potential IT issues before they escalate.  

24/7 Monitoring and Compliance – Around the clock monitoring means problems are identified and resolved promptly, reducing the chance of downtime and lost productivity. A Managed Service provider will implement robust cybersecurity measures and data recovery planning to ensure business continuity in an emergency. For clients operating in industries with data compliance requirements, a provider will make sure standards regarding privacy, reporting, and security are strictly followed.  

With technology evolving at an accelerated pace, effective and efficient IT management is more important than ever. Both Co-Managed and Fully Managed IT offer distinct advantages and the choice depends on your organization’s unique needs, goals, and existing infrastructure. Whether you opt for Co-Managed or Fully Managed IT Services, your provider will ensure that your technology is up-to-date, secure, and aligned with your organizational objectives. 

If you’re still not sure what option is best for you, let’s talk! We’ll meet your company where you are today, and help you grow.