Overview
With the ever-increasing changes in technology, many businesses are seeing the need to increase their IT budgets in 2023. Midway through 2022, the global business forecast was overcast with a high chance of uncertainty. With inflation rising at a pace not seen in 40 years (e.g., up 8.6% between May 2021 and 2022 in the U.S.) and soaring energy costs impacting the broader economy (up 34.6% year-over-year), many companies missed their Q1 earnings target. Stock markets were down significantly from 2021 highs, and changes in market conditions prompted many businesses to evaluate how to batten down the hatches to weather an economic downturn. As businesses in the U.S. budget for IT in 2023, there are a number of variables to consider. In this post we’ll look at:
• Capital vs. operational expenses
• Software purchases, subscriptions and licensing
• Contracts for telecommunications and Internet services
• Support and maintenance
Despite Shifting Economic Winds, IT Budgets Are Still Rising
Business plans over the next 12 months offer varying degrees of good news and bad news. First, the bad news: The vast majority (83%) of companies are concerned about a recession in 2023. Roughly half of organizations are planning to take actions to prepare for a recession – including those that have already started. Among these organizations, the top strategy employed will be reductions in non-essential spending (not necessarily related to technology).
Other common preparations include re-evaluating vendors or contracts, decommissioning unnecessary infrastructure, focusing on market segments or opportunities likely to prosper in a downturn, and hiring slowdowns.
Despite the cloudy macroeconomic outlook, things are looking quite bright for tech vendors. The 2023 State of IT data indicates most organizations actually plan to increase tech spending in 2023, despite the widespread belief a recession is coming.
Budgeting IT the Right Way
A business’ lifeblood is not only it’s people, it’s their ability to effectively move information both internally and externally. Adequately budgeting for IT is critical to assure that this communication and information processing can be done quickly and reliably. The IT budget needs to be one area that is continually reviewed to fit the needs of the business, allowing companies to most effectively process information as the speed of change increases.
As businesses review their projected IT spending in 2023, both capital and operational expenses must be budgeted for. Capital expenses might include such items as new laptop computers for new employees or remoter workers, new desktops for office-based employees, and new smartphones for mobile employees, such as salespeople and service technicians. Monthly operating expenses include any IT expense needed on an ongoing basis, such as software subscriptions, licensing, and maintenance.
The need for fast and reliable voice and data communications has never been greater. Contracts for telecommunications and Internet service providers will need to be part of the monthly operating expense category. This is a very important monthly expense and should be sufficiently funded so top-tier providers can best provide for this need.
Businesses should plan for things to go wrong. Hardware and software glitches always seem to occur at the least opportune time. Having a go-to service provider at this time, is also an important budgetary consideration in the IT support and maintenance category. Considering the hiring slowdown during the recession, it is best to onboard an MSP that provides the skills and expertise of an IT professional that is needed when things do not go your way but is does not weigh heavy on your budget.
Looking to create a more efficient annual IT budget and maximize the benefits of your IT investments? Our IT budgeting checklist offers a straightforward guide.
