IT Budget

Posted on 2012-08-18
Last Modified: 2012-08-28
I have been hired as IT director. I am going to have a meeting in which I will discuss IT budget.
This company has never had an internal IT. They have never spent one penny on IT. The equipment is obsolete and techologically speaking 7  -8 years behind. They are running office 2003 and free antivirus in every station and servers.
what is teh average that a company should allocate per year for IT buget in % ?
 for example if the total gross revenue in 90 millions dollars per year, how much should they give me to manage per IT ?
What is the generic rules ? how can i know how much to ask witout being unrreasonalbe ?
what the normal purcentage of the total revenue that every company put on IT budget per each year ?
what are valid arguments to persuade them ? they are not used to spend moeny in IT ...

thank you..
Question by:Italiabella
    LVL 7

    Assisted Solution

    My opinion.....whatever you can get...especially from a company that isnt security minded.

    What you need to do is establish what is needed, and price that out..then create a business case for needing it all and pitch the budget request to upper mgt.....dont worry about a specific budget number...worry about what you need to Secure your network, and try to convince them to allocate the funds....

    Best case you get what you wanted....worst case they only give you some...which also isnt bad..

    I dont see them giving you nothing or else why did they hire you?  There is obviously a culture shift occurring at your company
    LVL 7

    Expert Comment

    It would be best for you to priority rank what needs to get updated...

    But if you walk in to a budget meeting all "i know you dont want to spend money on IT but.......". Then you definitely wont get what you want.  Your job is to improve IT operations....their job is to budget...
    LVL 13

    Accepted Solution

    You need to focus on how much money they will save on payroll and incentives by upgrading their IT, and how much more productive they are. Do not approach this as an expense item, approach it as an investment in their business in many ways. First is the productivity and the employee time wasted watching the hourglass spin. Second is the cost of maintenance of that old equipment. Third is the risk involved of data loss - well over half of all companies that suffer catastrophic data loss for more than a few days go bankrupt over it. Fourth is the risk from data leaking out on the web and the negative publicicy. Fifth is the various compliance laws that the company may or may not fall under.

    Do a baseline where everything stays just as it is, except you replace the very oldest machines with the very latest technology. Instead of patching old equipment, spend the money replacing a little each month. Suggest a full replacement of every piece of hardware, new servers, new networking equipment and software, and you may not be around long. Suggest a gradual update of everyone over time and you will find that is what they wanted when they hired you.

    Your first priority should be a backup system that you trust, and an off-site location for it. Then learn what is working for the employees now and what is not, and the same for management. You may not be as bad off as it first appears with old equipment - some places get by fine for a long time on old equipment, and the money they have saved by not jumping into every new CPU platform along the way has been the only thing to keep them in business. SO don't jump to conclusions about how well things are working based on the technology level - ask the people who use it.

    Work on one of the key players in management by giving them a brand new computer to try, just as a teaser, to show them how much more efficient it is. Work on the people who have been there the longest and who have the most influence, or who really use their computers all the time and will benefit most. Take it one step at a time and do it right.

    Author Comment

    Thank you all for the helpful feedback.   Had another question, is there a general formula for calculating how much of an organization's annual buget should be allowcated towards their IT needs? Is it typically 3%? 5%? 10%?  20%?
    LVL 7

    Expert Comment

    No.  Again...focus on the IT needs.  If you assume 10% and you ask for that.....thats the most youll get....when you could have gotten more...

    Focus on your needs...not the budget...
    LVL 13

    Expert Comment

    by:Norm Dickinson
    That's going to vary tremendously by organization and industry, so your industry groups may be a better place to find that information without divulging too much company information here. You may not be able to use the numbers that make up the average, however, as it is just an average, not a hard number, and as you stated your client is not used to spending a large amount on IT. Unless yours is a very large organization, in which case it probably would be used to having an IT budget, you will probably have to do an a la carte system of budgeting with them, until you get to a baseline of technology which is more predictable.

    Author Closing Comment

    thank you.
    LVL 33

    Expert Comment

    by:Dave Howe
    As a somewhat belated followup - *DO* audit your new real estate for unlicensed software, and decide which should be swapped out for open source (its free!) or licenced (it isn't :( ) software as soon as practical. don't swamp your budget with that, but prioritize what you can and earmark a part of your budget for that as a rolling improvement. Look suspiciously at anything listed as "free" - often it isn't, if used in a commercial environment.

    For what does seem to be licenced, make sure you have all your paperwork in order - FAST (for example) have been known to claim that licence certificates alone aren't good enough, without an itemized receipt or invoice for the goods concerned.

    Much though I hate to line MS's pockets any more, one whistleblower looking for a handout from FAST can ruin your whole month, never mind day...

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