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What Should I Spend On IT?

When it comes to an IT budget how do you know what is appropriate in your organization? Truth is that number varies depending on what industry you are in. If you are in manufacturing for example typically your IT budget would be 2% – 3% of revenue. Sometimes that number is higher depending on the type of manufacturing you do.

Your CIO or vCIO if you outsource should be able to assist you in putting together a strategic budget for each fiscal year. Here are some considerations as you put together your organization’s IT budget.

1. Look at the budget from the owners perspective

Whilst the CEO or owner of the business does not want to go into every line item detail, but if they do be prepared to explain any potential ROI or Return On Investment. Together with the ramifications of course of not making that investment. Keep the tech out of it and focus on the business results or productivity gains the business would receive.

2. Build a full fiscal year budget

One of the common mistakes with a budget is not preparing a full twelve-month fiscal year budget. Allow for any fixed costs such as a monthly service agreement together with estimated costs outside of an agreement. Good examples of typical reactive style costs are adds/moves and changes where you hire new people, add additional employees, etc. Finally, track what you spend as you go this will help avoid trying to work out where expenditure was made.

3. Account for all of your technology expenditure

Your true technology investment goes beyond the investment with an employee, employees, or outsourced provider. Capture all of that technology investment. Ensure you track the investment with main line of business applications such as an ERP, legal practice software such as PracticeMaster or whatever application you use to conduct business. Often you will have support agreements – ensure you track and capture those also.

4. Track new hire costs by department

CIO’s are often asked to provide costs for new hire deployments. Make sure you understand potential hardware costs such as a laptop for a sales professional, an enhanced desktop for an engineer, etc. Understand potential costs for licensing such as email or other critical applications that new hires would need.

To help you understand in greater detail we have a webinar you could attend either in person or simply watch the recording. During our webinar, we connect with a valuable outsource CFO to understand how companies can leverage a true budget for IT-

Do you need help preparing your technology for the future? Our vCIO team is ready to tackle your challenges. Contact us today to find out what a vCIO can do for your business.

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