6 Tips for Effectively Budgeting for IT Services

6 Tips for Effectively Budgeting for IT Services

Budgeting for IT services and IT support is a crucial aspect of IT budgeting. It should adequately reflect the amount of money spent on running and maintaining the organization’s IT infrastructure, as well as expenses related to outsourcing specialized services.

Most small and medium businesses (SMBs) do not have an IT department in place since they tend to consider it an added expense. Even if they do have an in-house IT team, it usually consists of one or two members, who can feel overburdened as the business grows and demands from them increase.

This is where the availing of IT support through a managed services provider (MSP) becomes necessary. It is important that an organization’s budget reflects its strategic IT partnerships and plans while allocating capital to high-priority projects.

Budgeting for IT services, however, is easier said than done. After all, its consequences will not only drive organization-wide innovation but also help the business access IT services that promote digital transformation in the true sense.

Mentioned ahead are a few tips that will help you strategically budget for managed IT services.

1. Review Your Current IT Assets

You can start by taking stock of your current technologies and IT processes. Prepare an all-inclusive report of your IT assets, such as the hardware and software that you use. Be sure to mention the age of your computers, network tools, servers, and other devices.

Check if your hardware is reaching its end-of-life or if your software needs license renewal. You will need this information for budgeting for IT services for the coming year and allocate capital to cover upcoming expenditures. Your inventory report should also include information about the updates/upgrades that your hardware and software need.

Devices such as printers, copiers, and projectors, as well as computers that are not installed on your business’s network but are in use may have to be inventoried manually. You will also have to clearly define your IT processes. For this, create a list of the processes and workflows (both manual and technological) that help run your business.

Auditing your existing IT assets and processes will help you evaluate their effectiveness to determine whether any additions or changes are necessary.

If you’re not sure how to audit your existing IT assets, you may want to rope in a local managed services provider (MSP) for help. They are experienced professionals who know exactly how to create an IT inventory report that will help you budget as accurately as possible.

2. Consider Past IT Expenses

When budgeting for IT services, you will also need to consider your IT spending over the previous year. To make this easier, you should make it a practice to regularly assess the current condition of your technology. This will help you budget for looming IT expenses. You should take into account all your IT spends during this period, including all the equipment purchased and related expenses incurred.

While there are several software out there to help you with inventorying your assets, you can also use a simple spreadsheet for overall budgeting for IT services. Add all expenses, such as hardware purchases/leases, software licensing, VoIP services availed, internet costs, Web hosting expenses, and others for a holistic picture of your IT expenses over the last 12 months.

Whether you are looking for an IT support company or anything else, you should know that making this list needs precision. Getting IT support can prove to be extremely advantageous in getting your information right.

3. Prepare a Framework

When budgeting for IT services is concerned, reviewing your past IT expenses will help you understand how variable income and expenses tend to vary on a monthly, quarterly, and yearly basis in your organization. This information can help you create a baseline IT budget, which is akin to a framework that reflects the IT expenses and income for the current year.

You can adjust the numbers to accommodate anticipated budgetary changes. Simply change the date and year, leave the amounts that are not expected to vary, and alter the figures that you are sure will change.

4. Factor In Organizational Goals

It is important to remember that budgeting for IT services helps in understanding and estimating how much business capital is to be allocated and where. There is no replacement for accounting ledgers, which is why you need not worry about accounting for every dime you spend.

You should focus on aligning your IT budget with your company’s strategic goals. For example, if you want to augment your customer support services, you may want to turn your attention towards installing a robust and reliable VoIP telephony system, rather than leave your customers unattended and dissatisfied.

Budgeting for making IT improvements in areas that enable you to meet your organization’s strategic goals will help transform your IT function into a revenue-generating hub instead of a cost-incurring department.

5. Consider Updates, Replacements, Security, and Training

A lot of organizations operate on outdated hardware and software simply because they don’t know that their resources need to be updated/replaced. Hence, they continue to be used until they give up and lead to other issues such as system and server failures, downtime, cybersecurity vulnerabilities, and lost productivity.

As mentioned, it is necessary to track the age of your hardware and software when budgeting for IT services. This is crucial for budgeting for upgrades and replacements, thereby helping you avoid the additional costs and stress of dealing with sudden hardware and/or software failure.

You should also invest in measures that will enhance your cybersecurity initiatives. Many companies, especially small businesses, make the mistake of thinking that cybercriminals target only large enterprises, and do not adequately budget for fortifying IT security. However, statistics prove that 28% of data breaches in 2020 involved small businesses. Given that cybercrime is on the rise, it makes sense to spend more on strengthening your cybersecurity.

To cut costs, many companies also postpone or forgo providing IT training to employees. This move, however, can cause other issues going forward, especially those related to security.

 6. Don’t Confuse Cloud Costs with Operational Costs

When budgeting for IT services, modern businesses cannot afford to ignore the convenience and importance of cloud services. Budgeting for cloud services is, therefore, a step that cannot be skipped. However, organizations often consider cloud costs as operational expenses. This is done so they can increase or decrease them for gaining more flexibility to meet their financial goals.

If you plan to make the cloud a permanent component of your IT environment, it can be more cost-effective to consider cloud-related expenditures as a fixed IT expense, and budget for them adequately.


A lot of businesses make the mistake of not accounting for IT services in their budget. However, not budgeting for IT services can prove to be detrimental to your long-term operations. Preparing a holistic budget that includes IT expenses can help bring more clarity to your past, current, and estimated technology costs. Based on this knowledge, IT leaders can ensure that all IT gaps are plugged in properly and prevent any redundancies. Hopefully, the above tips will help you budget for all your IT needs, keeping your organization’s overall IT expenditures lean and in check.

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