How much should I invest in my business IT?

Have you ever asked, “How much should I budget for IT?”  

The answer to this question depends on how you plan to use Information Technology and how much it plays a part in your overall business strategy.  

According to TechTarget, small businesses (2-19 employees, in this context) spend, on average, 6.9% of their revenue on information technology, while midsized companies (20-100 employees) spend around 4.1% of their revenue on IT. For large companies, the percentage drops to 3.2%. But these are averages and may not mean much to you except to establish a reference point.

Can I use spending by employee survey data? 

Yes, but cautiously. Some survey data shows businesses spend, on average, between $2000-6000 per employee per year on IT hardware, software, managed services, IT strategic planning, and internet services. You might be surprised or even skeptical due to the wide range of figures, but that range realistically reflects that businesses have different IT needs, challenges, and opportunities.

For example, while moving to the cloud can significantly lower hardware investments, not all industries have the same flexibility regarding cloud vs. on-premise IT infrastructure. Our experience with our diversified customer base supports this wide range of figures. 

How is this spending allocated? 

Again, your business is unique, and you have your own IT needs, challenges, and opportunities. IT industry forecasts indicate that growing and profitable businesses are allocating spending this way:

• 25% – Infrastructure, including cloud services
• 22% – Collaboration tools, such as the Microsoft 365 suite, to enable teams to work together more smoothly and efficiently in both office and remote working environments
• 20% – Managed services, planning, implementing, and proactively overseeing IT resources 
• 18% – Cyber security services and hardware to protect the IT environment and data
• 15% – Applications or line of business software specifically designed for the type of business

Only you and your team, with the aid of an IT professional, can decide what you are willing and able to invest in Information Technology, but the details above should give you some guidelines.