2020 was a crazy year, and many small businesses have had to make significant changes to their operations and products. Some have taken their products into the digital realm. Some have had to deal with adapting their software to a remote workforce. No matter what your business is experiencing, spending and responsibilities related to IT are changing for small businesses in 2021. How? Let’s first take a look at how they’re spending money on IT today.
Businesses of all sizes typically spend about 3-4% on technology (source). However, small to medium-sized businesses spend more, as a percentage of their budgets -- closer to 7%. That comes to about $13,000 per employee.
Businesses normally allocate funding for technology for the following objectives:
Operations: This includes keeping technology infrastructure up to date.
Innovation: Always staying ahead of the competition, maintaining that technological advantage.
Growth: Scaling technology to match sales and operational growth.
The shift in spending is really driven by a shift in responsibilities. Small business IT staff are the ones having to take on these new challenges, primarily with the remote workforce and emerging threats to security. These result in new network architecture, new ways to communicate with technology, and new approaches to the products including new digital versions of your products. And as technology shifts, it remains vital that all areas of business continuity in an integrated design, allowing for access to data and systems across the company.
On average, businesses spend about 3% more each year on technology than in the previous year. Certain industries, including Insurance, Healthcare, and Banking will spend even more, up to a 50-60% increase (source). These industries are dealing with strict compliance requirements.
Companies allocate more money to IT as they move to the cloud, accommodate those remote workers, and add additional security. This results in a shift in the basic model of IT infrastructure, and IT budgets will reflect that.
The key is not how much you spend on IT but how you spend it. Your IT plan needs to be just as effective as your overall business plan. Technology can help your business innovate, drive efficiencies, and keep your data (including customer data) safe from hackers.
A great tool to use in planning your budget is the TCO Analysis. This total cost of ownership (TCO) tool will help you understand the true costs of investment in IT, whether that is in continued upkeep of existing technology, in replacing your technology, or through taking your IT to the cloud with hosted services. Combining this understanding with your business goals will help you figure out your investment into your information systems going forward.
Trying to figure out a proper budget and plan for IT can be a daunting task for small business CEOs, as can relying too heavily on your IT support team. We can help. We do more than design and develop custom software for businesses. We also consult with businesses like yours to help you ensure that your technology plan and budget will help your business increase performance, stay on top of technology, and remain a few steps ahead of your competitors.
Schedule a time to review your business goals, and we’ll help you create a technology plan to achieve them. Click here to get started.