How Much Should Your Business Budget For Technology?


Certain business costs are unavoidable.

Investing in the technology your business needs to operate in safe and streamlined capacity is unavoidable. The future of your business depends on a solid infrastructure, including the right technology solutions. So, how much do you need to budget for technology, and how do you get the most out of your investment?

Why Technology Matters For All Businesses

Every company is a technology company. This statement by Accenture Chief Technology Officer, Paul Daugherty sums up how important IT has become for successful businesses. Additionally, even if your business model is hands-on, you still rely on technology to communicate with your customers, track orders, and send invoices.


Without access to technology, it would be almost impossible to keep all the balls in the air. Plus, your customers likely include a high percentage of digital natives. As generations of individuals grow and evolve with technological advancements they become accustomed to technology integrating the day-to-day aspect of their lives. Likewise, they are expecting you to deliver your services in that way.

How Much Do You Need To Spend On Technology?

The exact answer will differ from business to business. Statistics show that small businesses spend nearly 7% of their revenue on technology. The number drops to just over 4% for medium-sized businesses and barely exceeds 3% for large businesses. The savings are the result of scaling.


To see whether your current spending is in line with overall industry trends, take a look at the cost of your current IT support. However, before making big changes it is important to have a clear picture of where your money is going and whether there is room for improvement. Optimization of a business technology budget is an on-going process.


Furthermore, if you are spending more than 7% of your revenue on technology, it is worth analyzing how your spending aligns with your business goals. Remember the figures above are averages: plenty of organizations spend more, whilst others need less IT support due to the nature of their business. Even if you are spending more, you are likely on the right track if all your technology expenses can be directly connected to your business goals.

In-House Or External Services?

As a small or medium-sized business (SMB) you need to choose between establishing an in-house IT team or using managed IT services. Managed IT services means contracting an external company, like Bridgehead IT, to support your businesses technology needs.

Some larger companies can afford to have a dedicated in-house team. However, combining different types of skills and staying up-to-date with the changing technological landscape can be challenging. Most often, SMBs benefit more from outsourcing and using managed IT.

In 2020, the market for managed IT services worldwide exceeded a value of $150 billion. North America remained the biggest market, but the Asia Pacific region is growing at the fastest rate. By 2026, the market is expected to break the $270 billion market almost doubling its value within five years.

One of the benefits of managed IT services for small businesses is that you gain access to a plethora of specialized skills and only pay for what you use. Compare that to an in-house team: few IT specialists know all the specifics about every aspect of business you need. Trying to cover all would mean spending a fortune. Read our full article that compares in-house vs outsourced IT services here.

What Kind Of Support Do You Need?

For most businesses, finance and accounting, cloud computing, data security, and digital marketing are among the top IT services they outsource.


Looking at the in-house option, you may potentially need to hire at least four new people. For small and medium businesses, this is a substantial increase in staff. External services may work much better for your budget.


Start by assessing each department’s needs and make a list of their existing technology assets and subscriptions. Consider integrating different functions and departments into one software wherever possible and create your technology budget from there.

Final Thoughts

In conclusion, budgeting for technology does not need to be difficult, but it is essential for any 21st-century companies of all sizes. Understanding what exactly your company needs is a prerequisite for finding the best solution. In many cases, the financial and logistical benefits of managed IT for SMBs outweigh the convenience of establishing an in-house team.


Have questions about budgeting technology resources and improving your businesses bottom-line? Call Bridgehead IT at (210) 477-7900.


Our army of experts provide insight, education, and custom technology solutions through unparalleled service. Check out our list of services that include IT Cost Control here.

INVESTING IN TECHNOLOGY FOR YOUR BUSINESS

Budgeting for technology is essential for any 21st-century business. Understanding what exactly your company needs is a prerequisite for finding the best solution.

BY THE NUMBERS

Statistics show that small businesses spend nearly 7% of their revenue on technology. The number drops to just over 4% for medium-sized businesses and barely exceeds 3% for large businesses.