Like any other aspect of business operations that requires funding, IT spend needs to be allocated and then invested carefully.

An IT budget acts as a backbone for your technology investment, recording income, spending scope and also saving opportunities. It also helps you to avoid frivolous expenses as investment is planned.

It’s not merely a financial plan; it is a strategic roadmap that aligns technology investments with business objectives. By outlining clear goals and allocating resources appropriately, your business can ensure the efficient functioning of your technology infrastructure, ensuring it is fit for purpose depending on your business objectives, while maximising your return on investment.

Aspects to include in your budget

It is important to consider every possible aspect in your budget to ensure there are no gaps and therefore, no hidden surprises. There are numerous aspects that must be considered, which we have broken down into sections.

Proactive IT Support

Whether you have an in-house IT team, or whether you outsource this to a trusted partner, you will need to allocate funds to supporting the operation of your technology infrastructure.

IT support is the cornerstone of a reliable and efficient technology ecosystem. Instead of waiting for issues to arise, a proactive approach anticipates and mitigates potential problems. To budget effectively for proactive IT support, follow these steps:

1. Assessment of current systems:

Begin by conducting a thorough assessment of your existing IT systems. Identify areas for improvement and potential risks.

1.1 Hardware

Investing in the right hardware is crucial for the smooth operation and security of your operation. Old equipment can cause increased downtime and pose security risks. So, when creating a budget for hardware, follow these steps:

Inventory assessment: Take stock of your current hardware assets and assess their performance and lifespan. Identify equipment that needs upgrading or replacement.

Lifecycle planning: Plan for the lifecycle of hardware components. Allocate funds for both short-term upgrades and long-term replacements, ensuring your infrastructure remains up-to-date.

Mobile device management: As more of your employees use mobile devices to access company data and applications, you need to assign some budget to Mobile Device Management.

Vendor relationships: Establish partnerships with reliable hardware vendors to negotiate favourable pricing and warranty terms. Consider leasing options to spread costs over time.

Future proofing: Invest in hardware that can adapt to technological advancements. Future-proofing your infrastructure helps extend the lifespan of your investments.

1.2 Software

Selecting and maintaining the right software is crucial for optimising business processes and also for cybersecurity purposes as out of date applications are more susceptible to hackers. When budgeting for software, consider the following:

Software licensing costs: Clearly understand licensing models and costs associated with the software applications your business relies on. Consider volume discounts or subscription models based on usage.

Upgrades and maintenance: Allocate budget for regular software updates, patches, and maintenance. Staying current with software versions is essential for security and functionality.

Training and support: Include funds for employee training on new software applications and ongoing support. Well-trained staff will work more productively.

Integration costs: If adopting new software, account for integration costs with existing systems. Ensuring seamless communication between different software applications is vital for operational efficiency.

An IT Asset Management application will help you to proactively monitor your IT assets to optimise the reliability and performance of your technology infrastructure. It produces detailed reports that give the nitty gritty details on all hardware assets, including age and replacement lifecycles, while software reports help to identify the status of operating systems, applications and gaps in security. Detailed, costed reports are produced that will enable you to budget for this aspect more accurately.

READ MORE ABOUT ASSET MANAGEMENT

2. Service Level Agreements (SLAs):

Work with your outsourced service provider to establish clear SLAs (even if you manage your IT infrastructure in-house, we recommend identifying SLAs for clarity). These agreements should define response times, resolution targets, and the scope of support services and the price you pay will depend on the levels you agree, for example, the shorter the response times, usually the higher the premium.

3. Regular maintenance and updates:

Allocate budget for routine maintenance. This ensures that your systems are running at optimal levels and are protected against vulnerabilities.

4. Employee training:

Include provisions for ongoing training to empower your staff with the skills needed to use technology efficiently and securely. This will also help to boost productivity.

Cloud Services

Cloud computing has become an integral part of modern business operations, offering scalability, flexibility, and cost-effectiveness. It can be utilised for a plethora of uses, including file and data storage, data analytics, data backups and archiving and team collaboration.

When budgeting for cloud services, consider the following:

1. Identify your needs:

Evaluate your business requirements and identify which processes or applications can benefit from cloud solutions. This could include data storage, collaboration tools, or even entire infrastructure migration.

2. Subscription costs:

Understand the pricing models of cloud service providers and identify the costs associated with subscriptions. Consider whether a pay-as-you-go model or a fixed-term contract aligns better with your budgetary needs.

3. Data security measures:

Allocate budget for robust security measures, such as encryption and access controls, to safeguard your data in the cloud.

4. Scalability planning:

Anticipate growth and allocate funds for scalability. Cloud services should be flexible enough to accommodate the expansion of your business without incurring exorbitant costs.

A note of caution here. You may think that your cloud provider looks after data backup, and they do to an extent, but there is also a shared responsibility.

Cybersecurity

In an era of increasing cyber threats, allocating resources for robust cybersecurity measures is non-negotiable. A defence in depth approach is the best way to protect your business, with several security measures working in unison to negate the cyber-attack threat.

Develop a comprehensive cybersecurity budget using the following steps:

1. Risk assessment:

Identify potential cybersecurity risks and vulnerabilities specific to your business. This includes assessing the value of data, potential attack threats, and regulatory compliance requirements.

2. Security software:

Budget for advanced security software, including antivirus solutions, firewalls, and intrusion detection systems. Consider cloud-based security solutions for real-time threat intelligence.

3. Employee Training:

Human error is a key factor in over 90% of data breaches. Allocate funds for cybersecurity awareness training to educate employees about best practices, including recognising phishing threats and the importance of strong password management. Turning your employees into your first line of defence is a strong policy to pursue.

READ MORE: CYBERSECURITY TRAINING

4. Incident Response and Recovery:

Prepare for the worst-case scenario by budgeting for incident response and recovery measures. This includes data backup solutions, disaster recovery planning, and cybersecurity insurance if applicable.

5. Cyber security compliance:

With the increasing number and severity of cyber-attacks, cyber security compliance has never been higher up on the agenda. We have for some time strongly advocated a ‘security-first approach’ and recommend your business, whether large or small, adopts a cyber security standard. Attaining such a standard will provide your customers with assurance that their data is in safe hands, while ensuring that your business is as prepared as it can be and complies with the regulations.

6. Cyber liability insurance:

To help mitigate the risk of cyber-attacks, you should include cyber liability coverage in your insurance package. A cyber insurance policy can help you recover from financial losses incurred by cyber incidents and events. Additionally, cyber-risk coverage may cover costs associated with remediation, including legal fees, investigators, crisis communications specialists, and customer credits.

Telecoms

There are big changes coming at the end of 2025, when BT will switch-off the existing Public Switched Telephone Network. If you currently reply on this analogue network for your communication needs, then you will need to act.

This move from BT means that all businesses need to make the switch from analogue to digital, whereby voice and other communications traffic is routed over Internet Protocol (IP). But there are challenges associated with making the switch which must be considered sooner rather than later.

So, you need to review your telecoms requirements in line with the move from BT, but this is also an opportunity to overhaul your complete system if appropriate. When doing so and preparing a budget, consider the following:

1. Evaluate communication needs:

Assess your communication requirements, including voice, video, and data. Determine whether a unified communications solution would be beneficial.

2. Service provider selection:

Research and select reliable telecom service providers. Negotiate service contracts that align with your budgetary constraints and provide the necessary features for your business.

3. Bandwidth Planning:

Estimate your current and future bandwidth requirements. Allocate funds for upgrading internet connectivity and network infrastructure to accommodate growing communication needs.

The budgeting process

Now that we've covered the key components of an IT budget, let's outline a clear budgeting process.

It is generally recommended that you allocate between 3% and 5% of your company turnover to your IT infrastructure requirements. Although this may differ depending on the status of your technology, this is considered to be a sound starting point.

1. Assessment and planning:

Using the information above, begin with a comprehensive assessment of your current technology infrastructure. Identify strengths, weaknesses, opportunities, and threats. Set clear goals and objectives for your IT budget.

2. Engage stakeholders:

Involve key stakeholders, including department heads, IT personnel, and finance teams, in the budgeting process. Collaborative decision-making ensures that the budget aligns with overall business strategies.

3. Prioritise investments:

Based on the assessment, prioritise investments according to business-critical needs. Address immediate concerns while planning for long-term strategic initiatives.

4. Research and vendor negotiation:

Thoroughly research potential vendors and negotiate contracts. Leverage vendor relationships to secure favourable terms and pricing for hardware, software, and services.

5. Allocate contingency funds:

Plan for unforeseen circumstances by allocating a portion of the budget to contingency funds. This ensures that unexpected expenses, such as emergency IT support or cybersecurity incidents, can be addressed without derailing the entire budget.

6. Regular monitoring and adjustments:

Implement a system for regular monitoring and adjustments. Technology evolves, and business needs change. Periodically review the budget to ensure it remains aligned with your organisation's goals and adjust allocations accordingly.

Crafting a comprehensive IT budget not only involves a strategic approach, but also a lot of thought and work. But it could be one of the most valuable documents you will ever develop as you will not only safeguard the productivity and security of your people and business, but also future-proof your success.

How to create an IT budget