How to Create an IT Budget
Start by reviewing the last one to three years of spend on IT-related expenses to give you an average annual spend. Large deviations from the past will likely be noticed from your CEO and accounting team, so unless your budget is justified, don't pad it with extra cash "just because".
Define your priorities. What are your immediate needs? Under-performing computers, outdated software, keyboards with missing keys? Make these items a priority within your budget.
Then, evaluate the list of expenses and categorize them into sub-groups, such as hardware, software and peripherals so you can create your budget by category.
Your IT budget will come together easily when you follow these guidelines:
Consider when equipment was last replaced to better plan for upgrades. Servers, PCs and laptops should generally be replaced every four years. There are exceptions, such as equipment used by engineers (such as mobile workstations with CAD software), which generally need to be swapped out every two years.
Networking equipment, like switches, routers and Wi-Fi components can generally wait until five or six years, but if you don’t know what you have, or how well it’s working, go with four years. Replacing it early will be less expensive than replacing it too late, as you won’t lose productivity or efficiency with employees.
A good rule of thumb when allocating for PC replacements is to take the total number of required PCs and divide that number by four, and use that number as a guide for annual replacement quantities. For example, if you require 40 PCs you divide 40 by 4, which equals 10. Ideally you should add a couple extra to have spares on hand, so bump that 10 up to a 12 and estimate the cost based on past PC purchases.
Many of today’s software solutions provide SaaS models (Software as a Service). This makes budgeting really easy because the software has a consistent monthly cost. For software that does not offer a SaaS model, there are often support or maintenance fees that will occur annually. This is also pretty easy to budget.
The tricky thing to budget for is software that is neither SaaS nor requires maintenance or support fees. It’s best to ask the software manufacturer about their suggested upgrade timelines and associated costs.
General rule is to plan for yearly or biannual costs to cover any associated fees, depending on the software’s release schedule and impact on the business. You may choose to capitalize these software expenses, but that’s between you and your accountant.
Peripherals and Incidentals
This is somewhat of a catch-all for IT-related accessories, such as keyboards, mice, flash drives, network cables, printers, things, stuff, you get it…
Keeping an inventory of spares can minimize the emergencies, and also help control your budget. The rush shipping on a monitor can be a pricey unplanned expense. Keep a couple extras on-hand and 5S your inventory.
Divvy up the rest of your IT stuff, to keep the years somewhat consistent.
If your company doesn't have a budget template, you can easily create your own in Excel, or use a pre-made budget template by searching online or within Excel.
Company X manufactures widgets, has 50 employees, a variety of software titles and their current required inventory is as follows:
- 40 computers
- 1 server
- 1 router (which is also the firewall for those “in the know”
- 4 switches
- 5 access points
Years three and four will come together similarly. While some networking equipment can be replaced every five or six years, it's best to stick with a four-year cycle. Knowing exactly when to replace specific equipment takes a fair amount of know-how. If you're in IT, chances are you are capable of making those decisions. If you're not very familiar with those specifics, stick to a four-year-cycle, call in some experts or start learning yourself.
Which brings us to people...
If you have all this IT "stuff", you’re going to need someone to support it. An IT guy will run you anywhere from $45,000 per year to well over $100,000 per year, depending on the skills you need and salary and benefits you're willing to pay.
If you are similar to Company X, you probably don’t need your own IT guy. You can outsource those skills to a group of knowledgeable professionals who can know all this stuff for you and, odds are, that whole team will cost you less per year than hiring an internal IT person.
Welcome to the shameless plug portion of this post. HawkPoint offers a variety of technical services, from IT support to consulting to full blown managed services. Give us a call. We will be happy to know all about IT and take care of your stuff, so you don’t have to.