HowMuchShouldYourCompanySpendonIT?(AndWhyThatNumberIsChanging)

The Budgeting Mistake Most Business Owners Are Still Making

Technology is no longer a department; it is your business engine. Every year brings rapid-fire advancements in cloud infrastructure, security, data analytics, and operational software. That pace creates real upside and real exposure, depending on how you invest.  

Many business owners make a critical mistake: they treat IT budgeting as a routine task, simply rolling over last year's numbers. This approach is a recipe for operational decay. It is how companies end up paying for tools nobody logs into, running unsupported servers, or discovering too late that their backup strategy doesn’t actually restore. You end up spending funds on legacy systems while ignoring the strategic investments that could give you a competitive edge.

Ask yourself: what’s the right IT budget for where your business is headed next year?

The answer isn’t always obvious, because benchmarks and business needs evolve faster than most planning cycles. Without a clear strategy behind the number, it’s hard for any budget to perform at its best.

The ROI of IT: Stop Viewing Technology as a Cost

Every dollar spent on your business must deliver a return. It's easy to see immediate ROI on sales staff or inventory, but IT is often viewed as a painful, necessary evil. 

You must shift your mindset. 

Strategic IT spending is not a cost.
It is an opportunity multiplier. Done well, it becomes the fuel for digital transformation. Turning technology into faster workflows, smarter decisions, and better experiences for customers and employees.

Here’s what that looks like in practice: a well-invested IT department enables businesses to: 

• Maximize Reach: Develop better customer relationships and tap into new markets digitally.
• Elevate Service: Provide unique, high-value service that your competitors cannot match.
• Operational Excellence: Streamline processes, drastically reduce overhead, and free up high-talent employees for core business tasks.
• Establish Market Leadership: Position your company as the most progressive and forward-thinking in your industry.

Customer expectations are rapidly escalating in this digital world. Technology allows your business not just to compete, but to rise above. The question is not “should we spend,” it is “are we spending in the right places to drive outcomes?”

Industry Benchmarks: What the Averages Really Tell Us

Benchmarks are useful, as long as you do not treat them like a finish line. The average technology budget has risen modestly over the last few years, but what has changed the most is where the money goes: cloud, security, data, and modernization. 

Deloitte’s research shows that the average technology spend rose from 4.25% of revenue in 2020 to roughly 5.5% in 2022, and has held near the 5% range through 2025 (with a wide variation by industry and business model). That makes the 5% a reasonable starting point for total technology spend, not a rule.

For context, larger enterprises often spend significantly more on digital transformation alone, sometimes high single digits to low teens as a share of revenue, especially where AI and data are strategic priorities, even while core IT budgets still average near 5%.

High-performing teams use that benchmark well. 

Start at ~5%, then adjust based on three variables:

• Growth velocity (headcount, locations, expansion)
• Regulatory pressure (compliance, insurance, sensitive data)
• Technical debt (aging systems, end-of-life hardware/software)

The more of those you carry, the more proactive your budget should be.

It’s also important to recognize that, as of late, security and resilience are taking a larger, non-negotiable share.

Many organizations now dedicate roughly 10-20% of their IT budget to cybersecurity and recovery planning. If your security allocation is well below 10% of IT spend, there’s a strong chance you’re underfunding risk, especially in regulated industries or anywhere sensitive customer or financial data lives.  

Bottom line: the highest number doesn’t guarantee success. The wisest plan does. Spending more only helps when it’s tied to measurable outcomes, not legacy assumptions.  

We see the same pattern every year: leaders aim for a “reasonable” IT number, then get surprised by waste they couldn’t see or risks they didn’t calculate for. These six questions will show you where the blind spots usually hide.

The 6 Crucial Questions That Define Your IT Budget Strategy

1. Where are we overspending on technology we’re not fully using, and what would it take to eliminate that waste this year?
Unused licenses, duplicate tools, and shadow IT quietly drain budgets long before anyone notices.

2. What vendor, software, or infrastructure changes are coming in 2026, and are we prepared before they become surprise costs?
End-of-life deadlines, major sunsets (like Windows 10), and pricing shifts do not care about your forecast.

3. Are we budgeting for cybersecurity based on real exposure,  or based on what feels “good enough”?
With incidents rising and SMB losses averaging seven figures, comfort is not a strategy.

4. Do we actually have visibility into cloud usage and renewals, or are we guessing until the bill lands?
If you cannot track consumption and auto-renewals, you cannot control the curve.

5. Does our IT budget scale with where the business is going, not where it’s been?
Hiring, expansions, new locations, and revenue initiatives should shape spend more than last year’s line items.

6. If we had to defend this budget to the board tomorrow, could we clearly explain why every major investment is here?
Predictable, lean, growth-aligned budgets do not happen by accident, they are built on strategy.

The Final Takeaway: Technology Is Your Investment

We need to change the common narrative that business technology is a necessary evil. Technology is a fundamental investment for the operational flow and success of your organization. Today,  most companies rely on their infrastructure: computers, cloud services, software, and security, to drive success.

One blind spot in your IT budget can cost millions. But with proper, strategic planning, your technology spend becomes a competitive advantage: more predictable costs, less waste, and fewer surprises when the stakes are highest.

Techvera helps you bring structure to the uncertainty, so your IT budget reflects your strategy, not last year’s assumptions. We’re here to:

• Eliminate overspend
• Identify risks early
• Prevent surprise costs and budget complexity 
• Stay ahead of vendor and software changes
• Build a complete, board-ready IT budget

Don’t plan 2026 in the dark. Download our free checklist or schedule a consultation with our team.

Citations:

Raskovich, K., Briggs, B., Bechtel, M., Ravinutala, A. (2024, December 11). IT, amplified: AI elevates the reach (and remit) of the tech function. Deloitte Insights. https://www.deloitte.com/us/en/insights/topics/technology-management/tech-trends/2025/tech-trends-future-of-ai-for-it.html

Turchi, M., Kark, K., Smith, T., Gill, J., Wilson, M., Maguire, E. (2023, September 13). From tech investment to impact: Strategies for allocating capital and articulating value. Deloitte Insights. https://www.deloitte.com/us/en/insights/topics/leadership/maximizing-value-of-tech-investments.html

Smith, T., Dost, G., Dhasmana, G., Patwari, P. (2025, November 4). AI is Dominating Digital Budgets. Is Your Tech Portfolio at Risk? The Wall Street Journal: CIO Journal. https://deloitte.wsj.com/cio/ai-is-dominating-digital-budgets-is-your-tech-portfolio-at-risk-195c5304

Toll, W., (2024, October 8). Cybersecurity Budget Benchmarks for 2025: Essential Planning Guide for Enterprise CISOs. Elisity. https://www.elisity.com/blog/cybersecurity-budget-benchmarks-for-2025-essential-planning-guide-for-enterprise-cisos 

Ornitz, S. (2025, June 3). How cybersecurity leaders are optimizing their budgets in 2025. Cymulate. https://cymulate.com/blog/cybersecurity-budget-optimization/ 

Agrawal, A. (2025, March 5). Navigating the Rising Tide: Techaisle’s 2025 Security Survey Reveals SMB Realities. Techaisle Blog. https://techaisle.com/blog/600-techaisle-2025-security-survey-reveals-smb-realities 

This article was originally published in 2015. It was updated in 2025 with new information, including sources, stats, graphics, and copy.