A new year means new budgets for your business as you plan out the expenditures that will (hopefully) drive your new goals forward. Because of its outsized effect on your productivity and profitability, your IT budget should be a primary focus of your financial planning in 2025.
With a well-thought-out technology budget that covers all the bases, you can cost-effectively improve your business's capabilities and operational efficiency, leading to a more profitable 2025.
Below are our top tips for effective IT budgeting in 2025.
What does an effective IT budget include?
Tip #1 is simple: Figure out what your IT budget is and what it encompasses. Sure, it should include your business technology, but in 2025 that means much more than it used to.
Your IT budget should include forecasted expenses for:
- Hardware
- Software
- Subscriptions
- Cloud infrastructure
- Personnel costs
- IT services and support
- Supplies and other operational expenditures
Leaving out any component of your company's IT costs from your budget will throw off all your numbers and cause chaos when it's time to spend, so inventory your expenses carefully. Check last year's budget and consult key stakeholders to make sure your bases are covered.
Establish your company's budgeting goals
To ensure that your budget is beneficial to your organization, establish the goals you want it to achieve so you can build your budget around them. Are you:
- Aiming for growth?
- Trying to achieve or improve certain capabilities?
- Hoping to achieve a profit target?
- Transitioning to a new IT setup?
Once you know what you want to achieve, you'll have better direction when creating your IT budget.
Audit your existing IT
Before setting any part of your budget, do a full inventory of your IT assets. This will show you where your technology is now so that you can set targets for the future. It also shows you which areas are in need of more funding, and more importantly, which costs are unnecessary and can be cut.
Meet with IT personnel and other stakeholders to answer these key questions:
- Which technologies or services will need to be replaced this year?
- Which tools or services are being underutilized and can be cut safely?
- Which tools are working fine and do not require upgrades or updates?
- Which IT assets are or will soon be obsolete?
Categorize your expenses
Based on your needs and goals, you should divide your expenditures into the following categories:
- Tools and infrastructure: Software subscriptions, hardware, support services, etc.
- Personnel: Salaries/Wages, benefits, training, etc.
- Operational costs: Maintenance, utilities, supplies, etc.
- Capital investment and project costs: Development of new capabilities, purchasing new equipment, etc.
Allocate funds to each category, with higher amounts going to categories that help drive your goals most.
Get an outside perspective
Check with colleagues and competitors in your industry to see how others are allocating their budgets. You don't need to copy them completely, as every business is different, but you may gain some valuable insight that can help you make informed decisions.
Also consider getting an outside IT consultant to help with strategic IT budgeting. A good IT consulting team stays on top of budgeting and expenditure trends in your business and can provide invaluable expert guidance.
Leave some wiggle room
One of the best things you can do for your budget is to not finish it. Do not allocate every last dime in your IT budget, because not matter how meticulously you plan, life will throw you a curveball of some kind sooner or later. You need some flexibility in your budget and some leftover funds in case you have to make a hard pivot or a crisis emerges.
Revisit your IT budget at least once a quarter
As we just mentioned, no plan survives first contact with the enemy, so revisit your IT budget after some time to ensure that it is on track to drive your goals forward. Keep in mind upcoming developments in the IT industry and shifts in the market. You may find that a budget shift is required to capitalize on new developments or avert disaster.
Get expert IT budgeting consulting
Contact outsourceIT if you need professional assistance with getting the most out of your 2025 IT budget. We'll provide personalized IT budgeting guidance based on your current needs and future goals.
