Budgeting is never an easy process, especially for small- and medium-sized businesses. There is often high demand for a very limited amount of funds. In many instances, growth strategies have to be balanced with smart operational upgrades. Digital infrastructure and security costs have risen tremendously for the vast majority of companies in recent years. As a result, some companies might think the wise thing to do would be to restrict IT funding to free it up for other needs or achieve other goals. Another strategy would be to forego the IT budget and simply purchase elements as they are needed.
Unfortunately, both of these strategies can be more costly in the long run. IT budgets are essential now more than ever before. If your business doesn’t have an IT budget, you may run the risk of several different adverse business effects, including:
- Uncontrolled Costs: Budgets allow you to allocate funds where they are needed. If you plan for new equipment, upgrades, platforms, software, or training, a budget ensures that you have the necessary funds. Without this budget in place, you might not recognize that you need something until it is too late. For instance, you may not recognize that employee training is needed until after an employee has made a mistake that could cost you time and money to correct. If the mistake results in a data breach, you may also have additional costs, fines, or penalties. An IT budget allows you to plan for these expenses, many of which can enhance your business’s performance. Without a plan in place, you may get regular ‘surprise’ expenses that have to be paid for at the last minute. In this scenario, these funds have often already been allocated, which puts your company in a bad situation where expenses are higher than cash on hand.
- Poor Productivity: Many digital platforms and applications became popular because they directly impact productivity and efficiency. If you lack the right tools for your team to do their job, both efficiency and productivity will be poor. Investing in an IT budget makes sure that you have the right tools to optimize performance across your organization, which can help your business – and its profit margin – grow.
- Employee Frustration: If you lack the right tools for your team members to do their job well, they will likely become very frustrated. And it may be more difficult for them to have confidence in the company’s vision, mission, and goals if they see that resources are not being adequately allocated to help them perform better. Employee frustration is a common cause of turnover, which can also be very costly for companies.
- Reduced Customer Confidence: Most people recognize that the future of business and commerce is heavily digital, which means that for a business to thrive, they need to be on board with digital transformation. If you lack the right technology to coordinate customer purchases, deliveries, history, and other analytical data that can help marketing and sales, you cannot meet or exceed customer expectations. And without delivering a stellar customer experience, your business may begin to lose its customer base.
- Loss of Competitive Edge: Small businesses often gain an edge over the competition by implementing better operational strategies or providing a better product or service. In many instances, these improvements are facilitated by technology. Without the right IT technologies in place, competitors will quickly gain the upper hand, and you may see your customers going elsewhere.
- Outdated Equipment and Software: Without an IT budget in place, it may be hard to justify carrying out any updates or upgrades. After all, it seems to be running perfectly fine, so why spend the extra money? But security updates and equipment upgrades are essential. These updates and upgrades often address new vulnerabilities in systems and platforms that hackers have identified. If you fail to fund your IT costs in your budget and overlook essential security updates, you leave your company open to cybercrime. Considering that the average cost of a data breach for a small business is between $36,000 and $50,000, it’s easy to see why planning for security measures is important. The average cost is $8.19 million across all-sized companies in the United States. This data presents a strong case for having a well-funded IT budget that includes security measures.
- Suffering a Cyberattack: The statistics above tell us the monetary cost of a data breach, but cyberattacks come in many different forms and have different goals. The financial impact is usually just the beginning of negative ramifications for a company that has been attacked. Other ways in which these attacks harm companies include
- the loss of employee and customer confidence due to a damaged reputation
- theft of trade secrets, data, intellectual property, marketing plans, or other valuable information
- fines or penalties if the company did not comply with data and security regulations
- litigation fees if customer data was breached and the impacted parties take legal action
- marketing or public relation costs to address a damaged reputation
- increase of insurance premiums
While this list represents many of the top reasons why an IT budget is required, it is not comprehensive. These budgets can also help you better promote your company, forecast customer needs and trends, and prepare your company for its future needs and goals.
But preparing an IT budget also represents a shift in thinking. It is a proactive approach to digital planning and security. While many organizations are reactive (such as those who only implement security equipment after a cyberattack occurs), a proactive approach focuses on preventative measures. And in most instances, preventing an attack or avoiding a mistake is far less costly for a business than not investing in the right IT equipment and resources.
For more information on IT budgeting and implementing the right technologies to help your company thrive and grow, contact Sagacent Technologies today. Sagacent is a recognized managed IT service provider delivering services across the San Jose region.