How to budget for IT

How to budget for IT

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Budgeting for IT can be a daunting task with many factors to consider and no set process. However, budgeting can bring many opportunities to your organization such as costs savings and reduced risk. With the benefits in mind, we’re here to guide you on how to create a technology budget. Here’s the breakdown on how to get started on your company’s IT budget.

STEP 1: IDENTIFY SHORT-TERM AND LONG-TERM NEEDS

Planning for short-term and long-term needs for hardware and software is key to staying within budget. Taking an inventory of current assets is the first step in sorting out priorities. Identifying technology that is not recommended for business use, non-complaint with industry standards, or has a high risk of failure will identify top priories for your budget. The below categories will determine which technology will need to be budgeted for within the next fiscal year:

Compliancy with IT Industry Standards

Not Compliant Technology does not meet industry standards and is not recommended for business use. Recommend addressing within the next 3 months.
Compliant with ExceptionsMeets industry standards, however technology is not recommended for business use. Recommend addressing in this budget cycle (3-12 months).
Compliant Meets industry standards and is in alignment with IT industry best practices. Recommend continued monitoring and addressing within the next budget cycle (12+ months).

Risk to Organization

High Priority High risk of failure resulting in impact to operations. Recommend addressing within the next 3 months.
Medium PriorityModerate risk of failure resulting in impact to operations. Recommend addressing in this budget cycle (3-12 months).
Low Priority Low risk of failure resulting in impact to operation. Recommend continued monitoring and addressing in 12+ months.

If any of your technology is not compliant, not recommended for business use, or poses a high risk to negatively impacting your business, it should be addressed as soon as possible. Neglecting to replace this technology could cost much more than simply replacing it, as we will discuss in step 2.

STEP 2: CREATE A PURCHASING PLAN

The second part to creating a budget is identifying ways to spread out operating and capital costs in order to stabilize expenses. IT assets have set lifecycles, which allows you to plan it into your fiscal years. Servers should generally be replaced every five years, workstations every three years, networking equipment every three to five years, and so on.

These lifecycles are set by manufacturers and outline what kind of support will be provided for the years based on the technology lifecycle expectation. Manufacturers set end of mainstream support dates and end of extended support dates to tell users when support levels will be reduced and end.

End of mainstream support means that manufacturers will no longer enhance the product, but there will still be support for security and reliability issues. End of extended support still provides security and reliability support; however, this marks the end of support for non-security hotfixes, requests for new features and designs, and warranty claims.

Lifecycles enable cost stabilization. For example, if we know that workstations should be replaced every 36 months, companies can refresh 1/3 of their computers each year to stabilize expenses. Abiding by industry standards and removing high-risk technology from your environment means that your organization will avoid auditing fees as well as the cost of technology failure, for example security breaches. From 2012 to 2014, 56% of companies that were audited by Microsoft received a noncompliance penalty of $100,000 and more. For security breaches, small to medium-sized business take a hit of $50,000 while for enterprise-sized companies, it can cost up to $700,000.

STEP 3: REALIZE COST SAVING OPPORTUNITIES

Investing into targeted technologies will reduce operating and capital expenses to stabilize costs.

Moving to the cloud reduces your company’s dependency on costly onsite hardware. Accessing data and programs over the internet reduces the capital cost associated with purchasing hardware. The cloud also reduces the amount of in-house maintenance required by automating upkeep and moving it into the hands of specialized experts who are on-call and available 24/7.

Virtualizing IT assets maximizes the power of hardware through virtualization software. This technology also reduces the amount of hardware your company needs to purchase, and reduces the maintenance costs and time associated with physical hardware.

Managed IT services fix costs to stabilize your company’s IT spending. Bundling day-to-day desktop support and technology strategy into a set fee and removes costly spikes associated with IT issues. Managed IT services can also incorporate managed print services and mobile device management, which fix costs for support.

STEP 4: FINALIZE YOUR IT BUDGET

Honing in on a final number for your company’s IT budget shouldn’t leave you overwhelmed. Assessing current technology for compliance and risk, and organizing priorities into a purchasing plan based on asset lifecycles is the foundation to your budget. Looking for efficiencies within your current technology with the cloud, virtualization, and managed services will help reduce operating and capital costs to keep your technology costs in check.

Need help creating your company’s IT budget? SysGen can help. Contact us to get assistance for your small to medium-sized business in Calgary, Edmonton, Red Deer or Vancouver.

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