IT Budgeting Best Practices for 2022

Having a clear, well-crafted budget is integral to your business. Without it, different departments won’t understand their spending limits and inadvertently stretch the company’s financial resources thin.

If your organization relies on technology in any capacity, then you must have a solid IT budget planned for 2022. We understand that IT can be difficult to budget for, especially since it’s an incredibly nuanced field that covers cybersecurity, networking, cloud computing, and more. That’s why we’ve created this guide to help you build an effective IT budget for 2022.

What is an IT budget?

An IT budget is the amount of money allocated for technology solutions and services to support a company’s objectives. It covers three key categories of IT spending: capital, operating, and project expenses.

Capital expenses refer to fixed asset purchases, which include new laptops, networking hardware, lifetime software licenses, and server upgrades. Operating expenses are elements that are critical to the company’s operations, such as cloud subscriptions, maintenance services, technical support, and compensation for IT personnel. Finally, project expenses are associated with facilitating a company’s strategic initiatives like disaster recovery planning, cloud migrations, or hybrid work implementation.

The chief information officer typically oversees the development of the company’s annual IT budget. They decide whether certain expenses are justified and what costs can be minimized to improve the company’s profitability and growth. Finance teams and other executives are then responsible for reviewing and approving IT budget proposals.

Why is IT budgeting important?

When you allocate insufficient resources to critical components of your IT framework, your company can face declining productivity levels, customer backlash, and low profitability. Overlooking hardware upgrades, for instance, means you’ll be stuck with old and slow PCs that can’t support the newest programs, decreasing employee efficiency and increasing costs in the long run.

In contrast, effective IT budgeting helps fund the technology solutions and services that your business depends on. It ensures that enough resources are available to keep your systems running optimally and gives IT departments flexibility to implement game-changing strategies.

What’s more, a well-crafted budget provides key decision-makers full visibility into how much is spent on IT in relation to overall business performance. They can then use these insights to cut unnecessary overhead costs throughout the year and redirect resources to higher priority investments.

How should businesses budget for IT in 2022?

There are several best practices you should follow if you want to create an IT budget that drives value in the coming years.

1. Audit your existing infrastructure

The first thing you should do is conduct a complete audit of your existing IT infrastructure. This involves creating an inventory of your company’s software and hardware assets. You’ll want to include plenty of detail in these inventories, listing down patch dates, locations, warranties, licenses, costs, and vendor information.

By auditing your infrastructure, you’ll know when to budget for upgrades, updates, and replacements. Computers, for example, generally have a life cycle of five years, covered by manufacturer warranties. Understanding where your computers are in that life cycle is important in knowing when it’s time for a hardware refresh. If you haven’t properly budgeted for these scenarios, you increase the risk of downtime and productivity losses.

2. Identify your company’s pain points

In addition to infrastructure audits, you should also assess whether your IT can adequately facilitate your company’s growth. More often than not, this process will uncover inefficiencies in your systems and processes, but it’s a crucial step in establishing strategic goals and IT budgets. Technology inefficiencies or pain points come in many forms, including:

Slow and unreliable networks
Subpar cybersecurity measures
Poor communication and collaboration
Noncompliance with industry regulations like HIPAA and PCI DSS
Lack of security awareness

3. Align budgeting with company goals

An IT budget shouldn’t just be a laundry list of tech purchases that would be nice to have. Instead, it should take into consideration the company’s objectives. By aligning budgeting processes with your company goals, you can better prioritize spending. For instance, if increasingly sophisticated ransomware is a recurring problem, you may have to set aside a large portion of your budget to implement a holistic cybersecurity strategy. This could mean investing in next-generation firewalls, intrusion prevention systems, anti-malware software, data backups, and rigorous security training.

Your budget should also account for long-term goals that are broken up into smaller expenditures. Let’s say you have plans to implement a permanent hybrid work environment. An appropriate IT budget to achieve this would consist of investments in cloud-based productivity apps, mobile device management software, company-issued laptops or cloud PCs, and business messaging platforms.

4. Set a budget timeline

A budget timeline keeps track of the start and end dates of your strategic investments. This is particularly helpful for identifying when your company will incur certain expenses so you can plan your cash flow accordingly. For example, if you’re planning to overhaul your current network infrastructure in the second quarter, you may need to ease off on other less vital tech purchases in the same period.

When setting a budget timeline, avoid front-loading all your major investments in the first few months of the year. Maxing out your cash early can leave your business unable to pay for unforeseen expenditures like fixing malfunctioning hardware or responding to a cyberattack. The trick to establishing a realistic budget timeline is to leverage the expertise of IT consultants and your in-house team in the early planning stages. Their input can help you understand when to make the right investments and how to manage technology spend throughout the year.

5. Create contingency budgets

There are numerous incidents that can disrupt business operations. The COVID-19 pandemic, in particular, forced a massive exodus from traditional office environments to remote work setups. Additionally, when businesses suffer a natural disaster or ransomware attack, they have to divert tens of thousands of dollars from other projects in order to restore operations.

Your budget must therefore account for unexpected events. It should consider the cost of resolving service disruptions in case of a power outage, data breach, or other serious events. You also need to devote a significant portion of your budget for developing disaster recovery and cybersecurity incident response plans. Considering what could go wrong and giving your budget extra room to deal with these scenarios can save your business from downtime and bankruptcy.

6. Review and adjust your budget frequently

An IT budget that’s only updated every 12 months is one of the fastest ways to waste resources and drive up costs. Over the course of a year, new trends and technologies may develop, which will require you to adjust your budget accordingly. It’s therefore important to review your budget on a quarterly basis and make changes as needed, whether it’s implementing new initiatives or reallocating resources from less successful projects. Updating your budget frequently also keeps you from being caught off guard by a surge in costs, which can have a significant impact on your organization’s bottom line.

Budgeting for the future is never an easy task, and it’s particularly challenging in these uncertain times. If you need a professional to assist you through the IT budgeting process, Dynamic Solutions Group is here to help. Our consultants will analyze your company’s current infrastructure and provide recommendations on how you should be spending your 2022 IT budget to achieve your goals. Call us today to learn more about our services.