Things to consider when setting an IT Budget

Things to consider when setting an IT Budget

Small- and medium-sized businesses need to carefully budget their IT expenses in order to be successful. After all, you can't just go around purchasing cutting-edge technologies just because some magazine article told you to. As a business owner, you want to purchase the essentials -- the technologies that boost productivity, eliminate pain points, and ensure business continuity.

Smart business leaders plan for their IT proactively, so be sure to consider these items when you are creating your budget.


Most hardware and software have a life cycle of three to five years. Even if your workstations and operating systems still work after the fifth year, most manufacturers and service providers won't offer anymore feature updates, support, or replacement parts.

Just like you did with software licenses, list out all your workstations and keep track of their purchase dates and warranties. Ideally, you should plan to replace your workstations when it's over three years old because this is generally when you will start experiencing significant performance problems.

When you are replacing hardware, be sure to account for OEM operating system or office suite software that was bundled in with the old systems. Typically you cannot migrate that software to a new system.

Server Hardware

Servers, like workstations, also have a limited life cycle. As a best practice, you should ensure that you have the manufacturer’s warranty on your critical server equipment. This will ensure that you have parts and service available in the event of a hardware failure. Many manufacturers offer extended warranty that can provide protection well past the base warranty that came with the system. If you are running out of extended warranty, it is time to plan your replacement strategy.
You will need to determine whether you want to continue purchasing hardware or if there are hosted options available. Hosting is a viable option today with many application vendors offering cloud versions of their products.

Internet Connection

Be sure to review your agreements with your Internet Service Provider. Many contracts include automatic renewal clauses with stiff penalties for early cancellation. If your agreement is coming due, be sure to give notice to terminate your existing contract and begin negotiating for a new deal. Be sure to check out other carriers as there are a lot of vendors who want your business.

This is also a good time to review your internet usage and upgrade to a faster service. Be sure to confirm whether there are any limitations on how much data you can use.

Software and Maintenance

Keeping your software up to date is important to ensure both productivity and security. Most commercial software applications have vendor support and maintenance programs designed to give you access to the latest features, bug fixes and security updates. Typically these support programs cost upwards of 25% of the original purchase price per year. What’s worse, if you let the support lapse, you will often need to pay a reinstatement fee or purchase the full package again.

Be sure to take an inventory of all applications installed in your environment. Chances are, you will find contracts that need to be renewed and old software that need to be replaced. For instance, if you're still using Microsoft Office 2007 -- a software that's no longer supported -- it may be time to include Office 2016 or Office 365 in your budget.


Many companies underestimate the cost of implementing proper security. You need to have good quality, up to date networking equipment including Next Generation firewalls and wireless access points. You need to purchase the service plans to ensure that you have the latest firmware and security updates to ensure this equipment is secure. You should consider implementing VPNs and Two Factor Authentication to enhance security.

Things you might need to include are: anti-virus software, cloud technology with encryption, email spam protection, laptop encryption, data backup and disaster recovery planning.

You might also need to consider physical security measures -- think surveillance systems, biometric scanners, and locked server rooms -- since internal malicious attacks make a fair share of security breaches.

(Suggested Read: What is cybersecurity and how can I protect against it?)


Your backups are your last line of defence against malware, hardware failures and other types of disaster. You need to budget for a rock solid backup solution. Regardless of whether you are using disk to tape, disk to disk or backup to the Cloud, you need to ensure that is is reliable and available when needed. Be sure to include whatever time and resources you need to regularly test your backups as part of your budget.

Uninterruptible Power Supply Batteries

Did you know that the batteries in your UPS have a limited shelf life? At a minimum, UPS batteries should be replaced every 5 years. Batteries should be replaced more frequently if you experience a high number of blackouts, brownouts or other power anomalies. If you have tired batteries, your UPS may not provide enough power to allow for a safe shutdown in the event of an outage.


Budget time is a great time to review your existing insurance to ensure you have enough coverage for the replacement of your computing equipment in the event of loss.

You should also review options for cyber liability insurance. Does your company have records containing personal, health or financial information? What would happen if an employee accidentally or intentionally exposed this data? A data breach may have serious implications to your business. You need to ensure that you have adequate protection.


Have you considered the cost of training in your budget? This could include training for your ERP system, general security training for all of your staff, or specific IT skills upgrades for key staff members. Effective training can offer huge benefits to a company in terms of increased productivity, increased staff morale and reduced rates of errors.

Still unsure? Ask for advice

One of the best ways to to know what technologies your business needs to advance is to ask experts. Managed Services Providers have enough experience with small- and medium-sized business IT to make solid recommendations based on industry and business objectives. They can point out things that you might not have considered, or that you even overlooked. A reliable IT vendor can also provide you with a quotation for the technology you might be considering implementing.

Looking to draft an IT budget, but unsure of the solutions your business needs to stay ahead of the competition? Cloud computing, businesses continuity, VoIP solutions -- we do it all! Contact XBASE today!

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