According to Deloitte Insights, businesses across all industries spend an average of 3.28% of their revenue on technology-related expenses, with the banking and professional services sectors spending the most. While IT is a key enabler of modern business, there’s also no denying that many organizations end up spending a lot more than necessary. SMBs, in particular, need to budget carefully to minimize risk and ensure success.
Here are five of the major cost categories to consider when drawing up a technology budget:
#1. Networking infrastructure
Technology expenses extend far beyond the cost of procuring, upgrading, and maintaining servers, workstations, and other hardware. There’s also the underlying infrastructure to think about, such as routers, wireless range extenders, and cabling. In-house servers also need the right environment, so things like cooling, cable management, and power requirements are also a factor.
Aside from the networking hardware and various other peripherals you need for an in-house IT infrastructure, there are also service payments to think about. For example, you’ll need to pay an expert to install everything. Ongoing costs will also apply, such as your internet subscription and regular network audits. You should carefully review your agreements with your ISP and any other technology providers you work with.
#2. Server hardware
Servers are basically high-end computers designed to host multiple desktop environments, applications, and huge amounts of data. Larger servers or data centers also require additional cooling, which means they need to be located in a climate-controlled room. Redundancies are also important to prevent extended periods of unscheduled downtime, as well as to keep your business safe from natural disasters or data breaches.
Servers don’t just cost a lot of money to buy and install; they also need ongoing maintenance and regular upgrades to keep up with demand. Many costs, such as unexpected repairs and remediation after data loss, are practically impossible to budget ahead. These days, businesses often use cloud servers instead, which are located in an off-site data center where everything is proactively maintained for a predictable monthly fee.
Unlike servers, workstations are designed to be used by one person at a time. They’re high-end personal computers used for demanding activities like graphic design, video editing, and other scientific or technical purposes. Because they provide a great deal of raw power, they remain the best choice for certain applications, particularly those in which latency is a priority. However, they’re also very expensive to buy, maintain, and upgrade.
For most use cases, businesses no longer need workstation computers, since the bulk of the computing takes place on a server, either located in-house or connected via the cloud. Budgets tend to be a great deal lower if all you need are barebones machines to connect to applications hosted in the cloud.
#4. Software licenses
Although the cloud became mainstream in business IT some years ago, software-licensing remains something of a mess. For example, it’s generally not permitted to install a desktop operating system in a virtualized environment, since software licenses are frequently provided on a per-core basis. Usually, for software-defined infrastructures like those hosted in the cloud, it’s necessary to have an enterprise license.
Many businesses have volume-licensing agreements with Microsoft and other vendors, which is important for those planning to migrate to the cloud. For companies looking to migrate to the cloud, it’s often necessary to look for specialized software licenses that are charged on a per-user, rather than per-device basis. Fortunately, this is much easier than it used to be now that many software products are offered as a service rather than a one-time purchase.
#5. Ongoing maintenance
One of the biggest IT costs is also one of the hardest to budget for. Ongoing maintenance is a necessity for any in-house IT infrastructure, but there are also many unpredictable costs, like on-site repairs and hardware upgrades. You might, for example, allocate a budget for regular upgrades, but the risk of hidden or unexpected costs will always remain.
Businesses across all industry sectors are migrating to cloud-hosted solutions as a way to proactively maintain their computing infrastructures without the need for on-site support. When outsourcing your IT, maintenance and upgrades become the responsibility of the service provider as per your service level agreements (SLAs). This way, it’s far easier to budget, since you have complete visibility into ongoing costs without the risk of unpleasant surprises.