How To Plan Your IT Budget In 2021

Did you know that IT spending is set to reach $3.9 trillion in 2021? That gives a yearly growth of 6.2% and shows that IT is still a focal point for businesses. But, in a world that becomes more digital every day, that really should come as no surprise.  IT is essential, that goes without […]

Did you know that IT spending is set to reach $3.9 trillion in 2021?

That gives a yearly growth of 6.2% and shows that IT is still a focal point for businesses. But, in a world that becomes more digital every day, that really should come as no surprise. 

IT is essential, that goes without saying. But, finding the time and money to set yourself up with quality IT services can be challenging. This year, though, it’s time to make it a priority.

Find out how to set an IT budget in this guide and not let the digital side fall behind.

What Is An IT Budget?

Before getting into how to plan an IT budget, let’s look at precisely what this is. If you’ve never created one before, you’ll be happy to hear that it can be relatively simple. The essential components include your regular outgoing costs alongside product initiatives. 

An IT budget is designed to forecast your spending for a period of time — namely 12-months. While it doesn’t have to be accurate to the T, it’s best to try to be as precise as possible to avoid falling short of money at year-end.

A reasonable budget should also help you limit your costs, stopping you from buying the shiny, new models just because they’re fresh and opting instead for the cheaper, still reliable model that was released a couple of years ago.

Some things an IT budget might include are:

  • Your department’s hardware
  • Each computer’s software
  • Your employees
  • Special projects
  • Any disaster recovery needed
  • Taxes
  • Emergencies


What Should Your IT Budget Be Based On?

IT budgeting isn’t just about throwing around numbers and hoping you can stick to them. It’s about a straightforward process using your current knowledge to create a plan you can realistically stick to. If you don’t have a current budgeting process, let’s take a look at a basic model.

Reviewing Your Current Expenses

Gather last year’s expenses to create a baseline for this year’s expenses. Include any current or projected costs that can help you add more details to your new budget.

For example, use an excel spreadsheet to have a monthly tally of your expenses with line items for things like salary, bonuses, recruiting, software licenses, telephone expenses, training, computers, sub-contractors, and other related costs.

Work Out the Quantifiable Return

Look at how your past expenses have helped your business. Did they save time, boost productivity, gain leads?

For example, if you compared a new software you purchased in the last year to the previous period (when you didn’t have it), are there measurable productivity improvements?

Create a Baseline Budget

Now it’s time to start estimating future costs. Look at how much hardware replacement you may need, how any employee increases or decreases will affect your budget and price increases across the market. For example, you might know that a particular piece of software is going to cost you $100 more a year than it did previously due to a price hike. 

Look at Where You Can Save

A budget isn’t just about what you’re going to spend, but also about how you can save. See if you can consolidate your tools to one vendor, for example, one that may offer you a cheaper package deal. Try to negotiate lower costs on contract renewals, explore alternatives on the market, and look at sales you can take advantage of. 

For example, 2020 was a year that many companies invested heavily in screen-sharing technology like Zoom. With Zoom and nearly every other software, there are often cheaper alternatives that don’t diminish the quality and help create long-term savings.

Create a Monitoring Plan

IT budget planning isn’t over when you’ve finished your budget. Plan how you’ll monitor your expenses to ensure you’re staying within your budget and how you’ll demonstrate the value of your costs. 

This may include assistance from your bookkeeping or tax professional to itemize your expenses that are related to IT. Once this type of accounting is set up, you can reference your actual costs against your budget.

Always Plan For Emergencies

You’ll likely come across some surprises throughout the year, so budget for them. Use 2020s unforeseen costs as a basis for what you’ll put aside, which could be anywhere from 5% to 25%. If you don’t use the funds by the end of the year, put them into projects for the upcoming year so that you can start them in Q4.

Key Considerations For 2021

In 2021, your budget could have some key objectives that you’ll have to consider. These include:

  • Building more remote working setups
  • Prioritizing your online user experience
  • Taking more advantage of IT business tools
  • Enhancing your cybersecurity
  • Improving your online training

Consider what’s important to you this year, and be sure to allocate enough money into your budget to fulfill this. 

A Sample IT Budget

Now you know a little bit more about the processes you need to go through before creating a budget, let’s take a look at what should actually go into yours. Here’s a basic sample IT budget.

Source: IT Budgeting: operational and capital budgeting made easy


You’ll need to budget for:

  • Recruiting IT staff
  • Internal salaries, resources per person, and benefits
  • External contractors 
  • Training for internal IT staff


When it comes to software, don’t forget licenses for one-time fees, subscriptions for recurring costs, and costs for software upgrades, training, and support.

Hardware & Infrastructure

  • Servers and hardware installation
  • Devices for staff (e.g., laptops)
  • Supplies (e.g., keyboards, headsets, etc.)
  • Support and repairs for your hardware

Project Costs

If you have unique projects, they need their own budget for consulting fees, specific hardware and software they’ll require, and the cost of staffing. 

Unexpected Costs

These are your contingencies mentioned earlier. Look for areas where unexpected costs may occur, predict the fees, and set aside a budget for them. 

Outsource Your IT

There are tons of IT budgeting tips out there that can make creating your own easier. But, there is one that’s better than all others. Outsource your IT. 

Using a managed service provider has many benefits: in short, you no longer have to worry about paying for internal staff, budgeting for resources, or putting aside money for an unexpected software upgrade. These are all concerns for your outsourced team. 

Of course, you will still need to create a budget, but it will be much smaller. It may simply include your own devices and your fees to the outsourced IT company if you don’t need anything else. If creating an IT budget and hiring an in-house team isn’t your priority this year, keep things simple by outsourcing.

What’s Next?

If you’re looking for managed IT services to make your internal processes a lot simpler, take a look at Data Magic. We’ll create a tailored quote by analyzing your upcoming projects, your ongoing needs, and the software best suited to your business. It’s much easier than separating money into different sectors for your IT budget – and saves you the hassle of running your own IT department. For peace of mind, contact us today

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