what are companies paying for IT and what should you pay?
IT costs can easily get out of control if you constantly chase the latest fad in the technology industry. But what is a reasonable price to pay for IT services? Planning for enhanced security and prevention from a critical IT failure is important but so is making sure you don’t break the bank with unnecessary spending.
Below is Velox’s research data on IT Costs:
- Why companies are spending more on IT in 2017
- What companies are spending on IT
- How those companies perform
- What critical expenses should be paid for
- Next actions
why companies are spending more on IT
Last year IT Security companies spent an increase of 58% on IT, and so far in 2017 spending is already up 73%. These are the companies that are paid to protect other companies and they are heavily investing in security. The reason for the spike is that the nature of the threats is changing. It’s no longer acceptable to do what you’ve already done. Breaches are being found and exploited at unprecedented rates—and it’s important to play offense and be proactive.
However, as a small business, you don’t have the luxury of spending extra money on a mistake, so it’s important to secure your assets and smartly move forward with a solid budget for IT services.
what companies are spending on IT
In a study (See references below) of small (<$50M annual revenue, most Bend, Oregon companies), medium ($50M-$2B), and large (>$2B) publicly traded companies, the study dissected how much each company is spending on IT services:
- Small companies
- Spend 6.9% of Revenue on IT
- Medium companies
- Spend 4.1% of Revenue on IT
- Large companies
- Spend 3.2% of Revenue on IT
how those companies perform
Companies that spend below average tend to outperform the larger companies. So, here’s the point: Invest, but don’t go overboard. Focus on building systems that will work long-term and avoid getting swept away in the latest fads. You can’t afford mistakes.
what critical expenses should not be neglected
When you’re thinking what to spend your IT budget on, think business infrastructure first, then toys and gadgets. Companies sometimes get this wrong because buying a new, but needed, firewall isn’t sexy. They would rather spend money on a new software implementation or getting everyone Ipads. New software implementations fail at a stagger rate and the risks of neglecting your business-critical services is astronomical, so be focused in your priority list.
Here’s a quick checklist:
- Network Security –> Firewall and Service
- Network Speed –> Proper Routing and Switching
- Network –> Server and Data Storage
- Client Facing Computers –> If these go down, customers complain
what to do about IT
There are two errors when it comes to IT costs and investments in infrastructure: First, replacing assets too soon when you haven’t gotten your money’s worth, and second buying too late after the system crashes. Balancing these two is the hard part.
Here are some ideas:
- Manage your risk
- When thinking of IT infrastructure, even if you choose not to replace an old piece of hardware, get a contingency plan (and budget) for if the technology fails, that way you can take quick action in the time of a crisis.
- Know your limits
- There are some indicators you MUST upgrade:
- Software/Hardware is no longer supported or updated (think Windows XP)
- Slowness causes lag to key personnel or processes (What does an hour of lag a day cost in a year?)
- Is that a customer-facing computer or server?
- Technology is telling you it’s dying
- Your tech will tell you it’s on its last life. Have you checked the error log for critical errors? Are the hard drives failing?
- Plan for the long-term
- When you do choose to buy infrastructure, plan for the next 5 or more years. Don’t plan on where the technology is today, plan some room for growth (think more RAM and more empty slots that can be expanded)
- Include proper setup
When you setup new hardware, make sure you also budget to get it setup correctly. Many problems will happen if you buy the wrong technology, or the right technology is not setup correctly.