Don't underestimate the importance of IT budget planning

Six Steps For IT Budget Planning and Creating a Template

An essential element of your company’s IT strategy is a multi-year budget forecast. An IT budget planning forecast enables organizations to schedule IT investments and expenses based on specific business goals and objectives. Proactively managing your IT budget on a regular basis may also help to reduce costs, standardize equipment, and improve company productivity through IT. Your managed services provider (MSP) is a valuable partner in this process.

1. Where should I start?

Having a firm grasp on your company’s goals is vitally important. Today’s IT environment, including the expansion of cloud services and ongoing cybersecurity issues, requires IT leaders to be included in strategy discussions. Are there plans for growth? What initiatives are scheduled for the next few years? Will these projects require more IT-related resources?

With this knowledge in hand, assemble all your IT-related financial information for the last 3-5 years.  This may include previous budgets, invoices, and IT support-related proposals. Use this data to set a historical IT investment and expense benchmark.

2. What areas should my IT budget cover?

While every organization is different, there are standard cost centers to be considered when developing your IT budget. Some of these items are capital expenses, some are operating expenses, and some are personnel related. Each plays a key role in the success of your IT budget planning.

  • Computer Hardware (servers, desktops, laptops)
  • Software and Subscriptions (Productivity Suites, CRM, Zoom)
  • Network Equipment (switches, firewalls)
  • Cloud Computing
  • Security Services
  • Internet Services
  • Staffing (In-house and outsourced)
  • Employee Training

You may also include telecommunication expenses and IT-related office supplies, such as printers, ink, and physical media.

3. How should I forecast hardware and software expenditures?

Plan to replace workstations (like desktop computers or laptops) in their third year of use. Workstation replacement schedules consider the expected lifetime of the equipment (end of useful life) and the cost-effectiveness of warranty coverage. It is also beneficial to plan for 1-2 workstations for inventory to address unexpected equipment failures. Servers and networking equipment, like firewalls, switches, and wireless access points, should be replaced before the fifth year of operation.

Business applications and software are usually billed on a contract basis with updates included (monthly, semi-monthly, or annually). Estimate the cost of your software applications and support services. Remember, these contracts may include a standard annual percentage increase.

4. How do I plan for new team members?

How many staff members are planned over the course of the 3–5-year budget? Allocate funds for new hire hardware, software, and IT-related subscriptions, considering potential price increases and technology changes. A reasonable cost for a new hire’s equipment, software, and subscriptions is between $4,000 to $5,000, depending on the position and requirements.

5. What about IT training and personnel costs?

IT training includes application specific skills, development, and security awareness training, among other proficiencies and topics. Most small businesses allocate between 2-2.5% of their overall budget to training. A significant portion of that should be in IT.

Include the cost of IT personnel payroll/benefits, or the cost of outsourcing IT management to a managed services provider (MSP), to complete your budget forecast.

6. How do I utilize this multi-year IT budget?

IT budget forecasts are just that – forecasts. The business climate may change, your company may change direction or there may be supply issues that increase prices. Each of these events has the potential to alter your forecasted budget.

A quarterly review is essential to staying on track. If you work with an MSP, your Quarterly Partner Review (QPR) is the right time to review your long-term plan and IT budget. This will keep your forecasts up-to-date and ready to implement when needed. Your client account manager may also work with you to review vendor contracts, renegotiate services, and streamline IT support services across company departments.

Focus Data Solutions helps SMBs with their IT strategy, network management, and security. To learn more or to request our IT Budget assessment services, visit us at