Elements of IT Spending
IT spending can be broken down into a number of subcategories. It encompasses everything from acquiring the physical equipment you need to power the technological services your company requires, licensing the software that runs on the infrastructure, paying for the personnel to design, maintain and deliver the services, and much more.
Each of these subcategories are important elements of an overall IT budget, though what one company requires — and, as a result, how much it will spend on each — could differ greatly from what another company requires.
IT Infrastructure Costs
IT infrastructure includes the backbone, nitty-gritty aspect of your network. It’s the cables that run in the walls of your building, connecting to major devices and running back to the network center.
Much of this infrastructure is a one-time cost, and can include items such as the actual cables and equipment needed to install them, to the associated time and labor costs of the projects themselves. Infrastructure costs can vary greatly depending on the size of the project, as well as how complex and time-consuming it is.
Software Licensing and Subscription Costs
Software licensing and subscription costs are taking on an increasingly larger percentage of IT budgets today. That’s because a major trend in the industry is moving toward managed services.
SaaS, or software as a service, involves paying ongoing subscription costs to a service provider for access to cloud-based programs and technologies. Rather than owning the software outright and having to worry about data storage and updating the software regularly, companies now pay a subscription cost that drives access to the newest versions of the technology.
SaaS spending comprises such a major aspect of IT spending that the total SaaS market, including both business and consumer spend, is expected to reach $232 billion by the end of 2024.
Hardware Acquisition and Maintenance Costs
Even if your company doesn’t own any of the software it uses, opting instead for SaaS, you’ll still need hardware on which to run the software. This will include all the computers, smartphones and tablets on which people work.
In addition to the actual acquisition costs, there are costs associated with ongoing maintenance of these devices so they continue working properly. Overall, Gartner projected that total spending on hardware will reach about $732 million in 2024, a 4.6% increase over 2023.
IT Personnel and Training Costs
Labor costs often account for a large majority of a company’s budget. In IT, how much your company will spend depends a lot on how you deploy your services.
If you opt mainly for outsourced IT services, then you may only have a few employees who work for the internal IT department. If more of your IT work is handled in-house, then your IT personnel and training costs will naturally be higher.
Some companies maximize their IT personnel budget by taking a hybrid approach involving IT staff augmentation and smart hands resources such as Techmate. This helps to keep overhead costs low without sacrificing the company’s ability to complete projects at the home office or satellite locations.
Cybersecurity and Data Protections Costs
IT services and cybersecurity unfortunately go hand-in-hand today. With so much data being produced and stored, it’s vital for all companies to invest in some form of cybersecurity and data protection.
How much you need, and where you get it from, again depends on what your IT infrastructure looks like. The more data you collect and store — and the more sensitive it is — the more you’re likely to spend to keep it safe.
Trends in IT Spending
Reports show global IT spending is seemingly increasing in just about every category. This is necessitated due to the increased reliance on technology (both owned and purchased) by companies of all types and sizes.
Below is a breakdown of where much of this money is going.
Current Trends in Global IT Spending
In Gartner’s forecast, global IT spending is projected to increase in nearly every major category over 2023.
The leading growth sector is software, which is projected for a 12.7% increase in spend over 2023, reaching almost $1.03 billion in 2024. The largest sector in terms of most spend is IT services, which is expected to reach nearly $1.50 billion, an 8.7% increase over 2023.
Other IT sectors include devices ($732.29 million, 4.6% growth) and data center systems ($261.33 million, 7.5% growth).
IT Spending Forecast for the Next Decade
As companies across the world continue to invest in digital transformation technologies, it’s expected that global IT spending will continue to increase. What may change, though, is where that money is being spent within the IT sector.
For instance, digital transformation technologies are projected to take up a larger portion of IT spending in the next few years, reaching $3.9 trillion by 2027.
Legacy Impact of COVID-19 on Global IT Spending
The COVID-19 pandemic had a negative impact on IT spending at the outset. In both 2020 and 2021, Forrester reported that global tech market growth slipped to 3% year-over-year.
While the pandemic had a negative impact on global IT spending initially, the sector bounced back quickly. In fact, the pandemic emphasized how important IT infrastructure and services are, convincing many companies to invest even more money in IT going forward.
During the pandemic, most companies had to close in-office operations completely. Even those that were able to stay open and operational had to embrace remote work. That necessitated certain upgrades and changes to IT infrastructure and services to, for instance, allow employees to easily access company files stored on network servers from their home computers.
Remote work has remained a significant part of business even after the pandemic has ended, requiring companies to ensure their IT infrastructure is able to keep up.
Why IT Spending Matters
Investing in IT can give your organization a competitive advantage, can optimize your operations and make them efficient, and can even help to manage risks. So, while IT spending is, of course, an outlay of costs, there’s a significant ROI that comes along with it.
In fact, in many respects, investing in IT infrastructure and services can often produce some of the biggest returns of any internal company investment.
Managing IT Spending
While investing in technology is a no-brainer, it’s equally important to keep IT spending under control. Leaders need to treat IT spending like any other department — by creating a budget, monitoring that budget, adjusting that budget and constantly maintaining it.
First and foremost, how you allocate your IT budget should align with your business goals. For instance, if a goal is to off-load data management while increasing data security, then you may want to dedicate a larger portion of your IT budget to SaaS programs.
Efficient IT spending begins with creating a detailed budget that categorizes expenses, including:
- Hardware
- Software
- Services
- Infrastructure
- Cloud
- Personnel
- Maintenance and replacement
- Miscellaneous
By creating an IT budget that’s detailed and separated this way, you’ll have better insight into what drives your IT spending, where you might be able to cut back and what you need to plan for in the future.
Today, many companies can benefit from enlisting the services of a professional IT services company. Techmate provides on-site local support for businesses and support through satellite locations as well.
Companies rely on Techmate’s services as a controlled (and often lower) cost versus other options such as up-staffing or other cumulative costs such as satellite support services for field techs, on-site travel and MSPs.
Utilizing staff augmentation provided by Techmate allows companies to access staff capacity they need as they need it —at a predictable, locked-in price. This cost certainty is crucial to many companies, especially as expenses for emergency, last-minute travel can add up quickly.
Learn how Techmate can augment your existing IT team and drive your business growth by booking a call with us today.
Frequently Asked Questions
What are the IT spending trends in 2024?
Global IT spending is expected to increase significantly in 2024. The main trend is increased spend in IT services, which for the first time ever is expected to eclipse that of communication services.
How can a company control their IT spend?
There are many ways to keep IT spend under control. Some of the most effective ways include budgeting, forecasting and incorporating staff augmentation into the IT plan.
Which industries have the highest IT spend?
The healthcare and financial service sectors are projected to have the highest IT spend in 2024, according to a recent survey.
