In many small businesses, IT is not a top priority. Typically, the IT staff is outsourced to another company that handles anything and everything technology based. This creates a disconnect between the organization and their IT. When annual budgets are drafted, the IT department usually gets left out.

Budgeting for IT is extremely important. Not only do you need to budget for fixed IT costs, such as IT support contracts, your ISP (Internet Service Provider) and telecom costs, you also need to think of calculating your IT budget for things such as hardware and software upgrades, new computers for new employees, as well as new technologies.

Creating an IT budget is not a complex task. First off, if you have an IT company or consultant, reach out to them, as they should be able to help you build a budget based on your business mission-critical needs. If this is not an option, here are some simple steps you can take to help create an IT budget.

1) Hardware

Take an inventory of all physical hardware that your organization owns. This includes printers, workstations, servers, network switches, etc. Assign a price to each as well as the date they were purchased. I typically recommend replacing hardware, regardless of type, every three to four years. Following this life cycle helps reduce losses due to failed hardware.

2) Software

Just like with hardware, an inventory of all the software used within your organization should be made. It should include the purchase price, date, and amount of licenses (if applicable) that have been purchased. With software, unless there is some underlying reason not to, I recommend upgrading at least every other version release. This helps reduce incompatibility when new operating systems are released as well as adding new features that may help save your company time and money.

3) Fixed Costs

Fixed costs is probably one of the easier things to budget. In fixed costs, put all of your recurring IT expenditures, from ISP, telephone, IT support, etc. These costs should remain relatively stable over the course of a year.

Time and time again organizations have not allocated any money towards their aging computer infrastructure.  In some scenarios, a company has hardware that threatens to fail but they do not have the money set aside to replace it. Here they are simply waiting for a disaster to occur. In other scenarios, systems do fail. The company then scrambles to replace it which typically costs more than simply upgrading every few years.

Creating and maintaining an IT budget is critical for the success of any modern day business. By creating the correct technology budget, costly hardware failures can be reduced and allow your company to make more informed, proactive decisions about your IT infrastructure.

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