How Much Should Your Business Be Spending on Digital Upgrades This Year?

Author: Joe Martin, Date: 2017-06-12

Take a look at how companies are shaping their IT budgets, and what their biggest expenses are.

A very common question among businesses is, “How much should I be spending on digital services?” or “Should we increase our IT budget this year?” It’s a good question, so we’re going to take a look at the latest IT budget trends to see just what companies are deciding.

Basic Budget Increases

Let’s talk percentages: It’s natural for IT budgets to increase at least a little every year to keep up with the inflation of costs and so on. Recently, these increases have been diverging between 1)businesses that care a lot about digital performance and new services and 2)companies that really don’t want to spend much on IT right now. Companies that want to grow their digital services are increasing IT budgets by around 4.6%. That can be compared to an average increase of around 2.2%.

Issues of Stagnation

Hold on, though! These budget increases aren’t so simple as all that. Thus far in 2017, IT budget decisions have been very…noncommittal. A study on UK buyers of IT services has shown hardly any different between 2016 and 2017 budgets, both hovering around an average of $294,000. That’s a serious problem, because IT tends to be an area where investment is required for new growth and continued efficiency. When companies don’t increase their budgets or make increases so small that it doesn’t really matter, they are essentially committing to a year of non-growth. That’s a little troubling for basic IT services, but much worse if a business needs to upgrade their security systems but doesn’t have any many to do see – especially since we’re seeing a rising in cyberattacks that target unprepared businesses just like these.

So why the hesitation to spend more money on IT? Most cited uncertainty with the global political situation. New tensions, uncertain alliances, and potential conflicts make everyone nervous, and when organizations get nervous they pull back on spending, particularly spending on new services that they aren’t sure if they want to adopt or not.

Bottom line: If you have the income, consider spending more than the average to make sure your IT systems stay in a healthy place.

Where Businesses Are Spending Their Money

But let’s take a look at what companies really are spending money on within their IT budgets these days. First up is cloud and hosted services, the number one target for these budgets. That makes sense – cloud/hosted services are a great way to save money by staying away from expensive hardware, and there’s a service or tool out there for pretty much any business need, so companies can always find a solution with a little searching. Company leaders can also understand the, “Like what we do now but cheaper and better” benefits of cloud services – although security remains a concern in this situation.

However, companies that really want to go all out on tech spending are increasing portions of the budget for much less traditional investment. AI systems are getting much more popular, thanks to their increased use in marketing, customer management, and security (where they look for common signs of suspect data or actions). Virtual reality is another spot where spending is going up as marketers investigate how VR can help spread their brand – although a common alternative is 4K drone video, another area getting a lot of interest. Some companies are even experimenting with 3D printing!

How Much Are The Big Companies Spending?

A whole lot. Take a look at the healthcare provider industry, for example. The annual spending budget in 2017 here was around $30 million, without an expected $2 million increase in 2018 – for companies with around 5,000 employees. And that’s not really that much when looking at it from a broad perspective, because…

Large Transformation Projects Will Always Cost More

If you really want a digital transformation project, your IT budget will simple not cover it. When the big companies want a transformation, brands like GE and the Dollar Shave Club are setting aside around $1 billion. While you obviously have to scale that down for smaller companies, it’s still a couple times larger than a traditional annual IT budget. Broad transformations cost money!

It’s important to remember that every IT budget will be different, and how much you should spend on digital services depends on your own goals. Not sure what your Vancouver area business needs? We can help! Give Compunet InfoTech a call at (604) 986-8170 or contact us at info@compunet.ca and we can help you decide on the services that will add true value to your company.