Transitioning to a Discrete IT Budget


On the smaller end of my audience of SMBs are offices where a distinct IT budget has not yet been established, and I want to address how to change that situation. Actually, over the years, I have found that SMBs of many sizes are particularly guilty of approaching IT in a haphazard way, buying only when things fail. With the pivotal role of IT in the workplace today, suffice it to say that a company that operates IT without any proper budgeting is on the road to mediocrity. On the other hand, having an annual IT budget allows you to do a much better job.


In an SMB where all IT purchasing decisions inevitably move through a boss who deals with them among all his other priorities and a thousand and one other matters to attend to on a daily basis, the approval process becomes ungainly quickly. The smooth functioning of IT is impeded. The obvious solution here is to convince the boss to allocate an annual budget for IT. This will allow for greater flexibility in purchasing decisions. In the absence of an existing budget, however, how can you even peg a number to it?


One simple way of figuring out an initial budget is to work out the total cost of existing IT hardware and software in the company. To assume that current equipment will no longer be serviceable in three years' time, divide the final tally by three. This would be your absolute minimum budget required to cover the replacement costs of your equipment. Your mileage might vary, but I would caution against putting down a figure that is more than five years out here.


Then, estimate the growth rate of the company and cater for those new PCs or laptops - and their corresponding software licenses as well. Tally recent IT-related purchases and contract services and work them into the budget too. Finally, I must say that the above steps will only lead to a budget sufficient for maintenance and bare-bones renewal of equipment. Any newfangled CMS or ERP systems must be factored in separately.


So work out all the above numbers and present them to your boss in a nice spreadsheet. Hopefully, you will be able to get your boss to agree to have an IT budget. Good luck!