Technology for Business Podcast – How Do I Budget for IT?
Join founder Chris Taylor and Sales Director Ann Mauer as they sit down to discuss the question “How Do I Budget for IT?”. They dive into the why, what, and how of SMB IT budgeting. Have questions you’d like to hear discussed? Send an email to email@example.com or head over to www.cit-net.com/podcast.
Have a question for Chris or Ann? Email firstname.lastname@example.org.
Technology for Business Podcast
Tara Klocke: [00:00:00] Welcome to today’s C I T tech for business podcast. Today, we are sitting down with Chris and Anne. We’re going to discuss how to budget for it. So we’re gonna kick it off. We’ll have you guys introduce yourselves and throwing in a question for you. Tell us your best vacation destination.
Chris Taylor: Go ahead, Anne.
Ann Mauer: Hi everyone. Ann Mauer, director of sales. I would say my, my favorite vacation destination was just recently when I went to Greece. It’s a beautiful part of our world and the country is amazing and people are very friendly and absolutely, absolutely a stunning, stunning part of the world. How about you, Chris?
Chris Taylor: Well good afternoon, Ryan one. I’m Chris Taylor, one of the founders of CI I T been in the technology business for now 35 years, finding that hard to believe. Huh? Anyway 30 years running CIT as the organization, [00:01:00] another five years, I was in the system builder business. So lots of technology, my background, and my favorite place.
I’m gonna use two places because one’s just not enough. So the Amalfi coast of Italy is probably one of the coolest destinations I’ve been. And then anywhere in the mountains, in the Western part of the United States on snow and skiing in the mountains is another awesome destination.
Tara Klocke: I think all of ’em are wonderful.
It sounds great. When are we booking the trip to go is kind of my next question for you guys. Let’s go. Let’s go.
Ann Mauer: Let’s get it done,
Tara Klocke: but I’ll make sure we get back on track. So I’m gonna kind of lead us off with the question that everybody kind of wanna know is why is it budgeting so important to an organization?
Chris Taylor: Yeah. I mean, I think the, really the, the key thing with budgeting is have a predictable forecastable technology spend, right. Too many organizations go into. And one of the things that we hear from them is it’s, it’s too much roller coaster, right. Spend a lot, you know, there’s no consistency. So by at [00:02:00] least establishing a budget for your technology and, and technology going forward, we have a baseline that we base it off.
It’s not always perfect. It’s a evolution of a budget, but having a budget rather than no budget helps with smoothing out those highs and lows of technology.
Ann Mauer: Yeah, I would agree with that. And it’s imperative to control cost. I mean, at the end of the day and, and accurately forecasting, you know, the spend when it comes to staffing levels, support contracts with external managed service provider, all of those.
Come into play when you’re really looking at your total cost when it comes to it spend and being, I think more, more importantly with the pandemic, we’ve learned a lot about how do you control those costs and how do you accurately make investment in it to help you grow your business. And I think that that’s very important to, to that planning and that strategic budget budget.
Chris Taylor: And I think the other, I mean, [00:03:00] if we look back, it used to be that we would just go to our clients and customers and talk about buying new technology, the latest and greatest, the fastest, you know, it always, always spending, spending, spending on the latest today. Our clients really wanna understand. Why should we spend money on technology?
What is it doing for the core business? Not just buying faster, newer, but you know, how do we lifecycle manage? How do we, how do we do we really need all this horsepower? How do we be more efficient with that technology spend? So it’s much more of a business conversation around that budget than it is just buying new fast, cool technology.
Ann Mauer: well, and I think it’s also too changing the, the impression of technology too, right? We budget for electricity and, and gas and natural gas and those expenses that just become part of running a business. And I think shifting our clients to, to help them understand that if you’re not budgeting for it and you depend so heavily on it, [00:04:00] right.
That planning really needs to be executed correctly. Because it. If you take away the technology, how do we operate as organizations and, and having accurate spend associated to those costs is very important.
Tara Klocke: Great. That actually leads me into my next question. So we’ve kind of established it. Budgeting is super important to that organization, but how is the timing factored in of my budget?
How far do I look? What’s the forecasting look like? Can you guys elaborate on that? Yeah.
Chris Taylor: So most of our clients, we try to, we try to get ’em out to five years, right? So we look at 12 24, 36, 60 months, right. To try to help understand what that looks. It’s very difficult. I think to go out much more than five years, but we try to give them, you know, in the next 12 months, what does it look like?
What does it look like in the next three years? And then what does that really? That out far out five year look like? So we can try to [00:05:00] smooth out that angle budget. We may not spend it all in one calendar year, but it’s a, it’s a longer term budget, right?
Ann Mauer: And I think the timing of that is really associated to when manufacturers make changes, right?
When we have organizations running applications and Microsoft, for example, changes the operating systems. And, and, you know, Sunset some of those OSS it’s, it’s the timing of, of planning in advance of when that’s happening. So you’re, you’re not bleeding edge, but yet you’re still moving forward as the technology changes.
So it’s, it is, it’s a lot about forecasting and, and, and leaning on the manufacturers for when they’re going to, you know, sunset, you know, products as well is really important to that, to that to that.
Tara Klocke: Great. So I wanna know too is how, how do I start? What kind of percentage do I look at of my budget? What all is [00:06:00] considered kind of in that technology piece too, of, you know, do I look at CapEx OPEX? So if you guys can kind of talk a little bit more from a business side and then also from the technology side,
Chris Taylor: Yeah.
So there’s lots of, of budgeting mechanisms out there, right? There’s a, there’s a percentage of, of revenue in the organization that really varies depending on the industry, how much regulations involved, how high tech the organization is, what their use of technology is. There’s historical. We, we can always look back historically that 1, 2, 3, 5 years also to kind of look forward, we can use history, right?
It really depends on industry that you’re in what you have for internal resources, how you leverage external resources. Cause. Both the internal resources and external should be part of that budget. Right? So your employees, your resources, plus your contracted resources in the case of, you know, a partner like CIT.
So we really need to look at it holistically of, of not only [00:07:00] services, but what does that product budget like as well? And those are kind of two different components, right? What does the service component look like on an annual. Basis. And then what does that product spend look like? And that product could be staggered over that five year period, right?
Where it’s not all in one year. So lots of different. And you can, there’s lots of different methods out there, but you know, the big thing is have a budget, establish a budget. You know, it’s not so much concerning to what is the perfect budget it’s cuz every organization industry’s a little different, but establish the budget, try to get some accuracy around it.
And then look forward to that five.
Ann Mauer: Yeah. And, and I would say to just comment on that as well is based off of the industry, you know, the, the more compliance regulated organizations typically have to follow some more stringent guidelines to, to the services and the things that they’re, they’re doing in their environments from a regulatory perspective.
So understanding the [00:08:00] industry, understanding. What those requirements are, can really also help you identify what that spend needs to be. And I think too, it’s important to note the, the. The way that we compute today has changed. Right? And so we have the ability to leverage, you know, cloud as we, as we plan for our customers, right.
We wanna make sure that we’re being strategic and understanding. Does it make sense for certain components of their environment to move to cloud compute you know, that digital transformation into other services. And that really does then change the, how you procure that, that, that budget right. Moves more into an operating expenditure.
So all of those, those thoughts and, and those Kind of those initiatives really need to be planned for. But really understanding what’s available for customers I think is really important as well, you know, and, and sometimes it’s a fit and [00:09:00] sometimes it’s not, but at least evaluating where it makes sense.
And that kind of changes how you, how you budget for that, right? Because it then does move from a capital expenditure into that OPEX spend and making sure that, that, you know, organizations understand. Changes and they can plan accordingly for that.
Chris Taylor: Yeah. And if you look at some of the industry drivers, especially in these last five years and, and really over the last two years with you know, coming through and out of this pandemic the budgeting has become a little bit of a moving target, right?
We, we had a move. We had to move a lot of workload to cloud. We had to move a lot of workload to home offices. So, you know, our budgets changed quite a bit from pandemic, but even prior to pandemic, the, the budgeting around security had become a huge, huge component of that it budget. So if we take and we look at today, you know, security costs are.
The product costs, which typically our [00:10:00] industry can get more product for the same price or the same product for a less cost is now increased. So the price of the product has gone up. The price of labor’s gone up and the price of security has gone up along the way over these last five years. So. These budgets in the last, especially two years have really been taxed because there’s been so much change.
And then obviously the focus around security all costs more money at the end of the day. So we’ve been trying to help our customers just try to look out forward, try to get, you know, increases, especially around things like security are, are rapidly increasing and you have to get those into budget or else they’re hard for a lot of organizations to, to.
Ann Mauer: right. Well, and I think too, there’s the supply chain issues have, have really caused, caused some, some havoc for customers as well, even if they did have budget. Right. You know, the availability of goods is, is even more difficult to come by. So then that even becomes a more strategic planning as to when you’re going to make these projects [00:11:00] move forward based on the availability of the, the products and that you need.
Chris Taylor: That hasn’t helped. So
Tara Klocke: yeah, I think a lot of organizations, how to quickly make that change once COVID hit and kind of figure out what does this look like now? Cuz we gotta make something happen. But a question too is, you know, we’re establishing our budget, but who really owns that it budget? Is it our cross departs?
You know, is it at a sea level? Let’s talk a little bit about that.
Chris Taylor: Well, I, I think it’s across the whole organization, right? I mean, the, the cost of that in most organizations, most, every user has some touch with technology. So I think that budget is across the organization and that’s why you’ll see some of the.
The estimating tools out there based on organizational size revenue, percentage of revenue, number, number of people, things like that to try to spread that cost amongst the organization. You know, I think [00:12:00] it’s, you know, it’s typical that the, the financial person in the organization’s working pretty in tune with either the internal technology or the external provider to lay out that budget.
But yeah, it has to get allocated across the organization because it’s not just a single depart. That’s a cost center, right? It’s it’s a organizational cost.
Ann Mauer: And I think too, Chris, I think putting it into an a support per endpoint. Pricing model right at the end of the day you know, some organizations are, well, is it a total spend?
I mean, how should I be budgeting for this correctly? And you know, some say, if you can identify the number of endpoints in your environment and then allocate a cost associated to that. Full support over a 12 month timeframe. That’s how most organizations I think are trying to get to where, you know, they, if they are in a managed service agreement and they’re getting a lot of services included in that, in that agreement, but what are those additional costs?
[00:13:00] Right. Whether what are the soft costs, whether it’s life cycle replacement of hardware deployment costs new projects, you know, we, we have to replace a server. What does that holistic cost look like? And in breaking that down to a per endpoint you know, per endpoint conversation kind of helps yeah, the organization put it into.
Chris Taylor: and, and trying to establish, you know, there there’s resource costs, both internal and external resources. There’s that maintenance cost just to keep really kind of the utility of technology, keep the lights on per se. Right? So you’ve got resources, external internal to that utility cost.
And then you’ve got the projects. How do we, how do we move that technology forward? How do we get new gear? How do we get faster gear we need to, so you have to really kinda look at all those, bring them together. Determine if it’s internal resources or external and try to leverage. The efficiencies of that.
Right? And that’s where really, we talk about leveraging a good [00:14:00] partner along with your internal resources. If you have them to try to get the most bang for the dollar for technology spend, because it doesn’t make sense to hire at all, you know, and in some cases, doesn’t, it doesn’t make sense to contract at all.
So that has to fit into that budget conversation about how do I balance internal technology. Focus people and my external people and how do I pay for it? All right. And what, what’s the balance there? And that is a tricky exercise that we walk through with our clients quite a bit,
Ann Mauer: I think. And I think it’s helpful to have a framework.
Right. I think it’s helpful to have a checklist. I think if you can have a. Data, you know, if you’re, if your it department either internal or externally can report on some of the data that, that your systems are generating can also help you make those decisions. You know, we, when we work with our customers on that basic life cycle refresh, there are certain, you know, critical components of an environment that we say.
A life [00:15:00] expectancy. Right. I think unfortunately manufacturers do build in obsolescence in their products right. Because they wanna sell hardware. So how do you plan for that? Right. And we wanna make sure that our customers are getting the return on their investment over the length of that, that, that solution.
So Chris, would you agree like over, if you looked at a, a traditional environment you know, most customers have a firewall, most customers are running some type of internal server system, desktop laptop computing devices. I mean, those, those do have a life cycle. I think it’s dependent on a. How much you’re pushing on, on that year.
Right. But I, for most of our customers, we’re saying, you know, firewall three to five years. Right. You know, the more that we ask of, you know, cloud compute right. And pushing more to. More to the cloud. We need to have bandwidth. Right. [00:16:00] And so as, as customers grow you know, the firewall component needs to be changed out.
So, you know, three to five years on those systems, typically servers you know, five to six years. A lot of the server replacement costs is associated again to the core applications that they’re running and planning for. When, when Microsoft sunsets, you know, they’re operating systems and, and kind of the dependency on the, those two obviously we wanna make sure that we’re not running.
Old legacy hardware, right? Because that then becomes, we, we potentially have some hardware failure components at some point, and making sure that our customers are running some manufacturer support warranties on that core gear is really important. We wanna be able to have the ability to call those groups to get replacement componentry.
What other things, you know, endpoint devices. Laptops [00:17:00] desktops again, typically a three year life cycle. Most oftentimes we’re telling our customers. Try to replace at least a third of your fleet of your endpoint devices so that you’re not holistically changing those all out at the same time. Cause that gets very expensive.
You know, just making sure that a, if they have data in their environment, that they’re leveraging that data to make better business decisions. And just monitoring those components. So obviously at CIT, we track a lot of those hardware, software components for our customers, so that we can build out what that strategic plan looks like.
And I think that that helps just provide again, a better plan at the end.
Chris Taylor: Yeah. And I think two major technology changes that have. Clients understand budgeting better has been virtualization and the, and the cloud migration, the workload, you know, moving workloads to the cloud, right. It, it hasn’t, it, it is it, you know, everything isn’t more expensive, right?
I think we’ve become better at utilizing [00:18:00] hardware and utilizing it up with virtualization. We’ve found ways to move CapEx cost to operat cost and moving up to cloud workload. So we. Trying to, you know, it’s not all Gloo and doom. We’re, we’re trying to decrease where we can the budget as well. Right. So if you can use hardware more efficiently, faster, bigger, better, rather than just replacing every five years, because the built in hardware obsolescence, it makes that.
Model more efficient, same with, as we move those workloads to the cloud, we decrease our on-premise hardware capacity workload that we need. So it’s shifting cost, but hopefully it does help try to reduce that budget over time as well, because there’s plenty of things adding to the budget. So we’re trying to help, you know, it’s, it’s not all up up up.
We try to help re reduce it with certain technology changes that are happening as.
Ann Mauer: Right. Well, and I think it goes to the framework, right? I mean, with most of our customers, we’re, we’re taking the N framework the national Institute of science [00:19:00] technology and those recommendations from the federal government.
Right. Of how we wanna, we wanna be able to provide the same level of Planning, you know, that meet some of those requirements for our SMB customers that we’re supporting so that they’re, they’re looking forward for the, the next you know, what is the next security software solution that they should be looking forward towards?
And I think, you know, the executive order with the passing of having EDR and running in your environment also is something that. To be part of that planning conversation, right? Because, you know, we’re, we’re all gonna be in a position where our technology spend has to increase as the demand on, on securing our environments is, is necessary at the end, end of the day.
Tara Klocke: Yeah. And I’m really glad that you brought up that point because we’re talking a lot about the budgeting side of, you know, even that old [00:20:00] hardware and end of life on operating systems, that there is a risk for cybersecurity where they can get in cuz you are running old technology and. I did wanna mention if you guys hadn’t caught that before we had a podcast earlier with Kyle and Jake talking about migrating to the cloud, cuz there are still a lot of questions of, is that the right path for me?
Is it secure? So if you haven’t listened to that, I would suggest going out and talking about that and kind of helping you understand a little bit, but I did wanna kind of see on the, is it side and then that budgeting, you know, where do we go? So we’ve got that budget established. How do we look at it forward thinking, can we adjust as we go?
Where, where can I add that in? Because yes, it’s gonna be maybe expensive in the long run, but you gotta start that budget because you’d rather have that slated. Where you don’t have something happen with a cybersecurity [00:21:00] incident coming in because you chose not to upgrade or do something like that. So I just kind of wanted to make that statement and then you guys can have any
Ann Mauer: remarks on that.
Chris Taylor: Yeah, and most of those budgets are, are fluid, right? I mean, they’re gonna move, they’re gonna change. They’re gonna morph. They’re gonna switch the buckets that they’re in because of those changes. Obviously we’re spending a lot of time talking to clients about making sure they’re budgeted for those security pieces of the puzzle.
Right. And, and that’s not just putting in the latest and greatest security that’s as you mentioned, Terry, getting rid of old technology that’s unsupported get rid of, out of date and a live product. That’s unsupported. Along with that looking forward as to what’s coming next and most of our clients.
If, if they weren’t regulated, they weren’t required to kind of keep up with some of that. It was really on, on their, you know, timeframe. Now when, when the industry has come forward, when they try to do their cyber security renewals, they’re being asked the same thing that the regulated clients are doing.
So we really need to spend some time talking about that part of the [00:22:00] budget around security, right? Where are we at? How comfortable. Do you think we can check all the boxes when your, when your insurance carrier comes to the door next time? And if not, let’s start getting, let’s start chipping away at those.
Let’s get ’em in the budget. Let’s get the top priority ones first and let’s start chipping away because we know it’s coming, right. It’s not a matter of, of if it’s a matter of when they’re gonna, you know, come ask for these certain things to be done with your technology. And if we wait too long, it just becomes a, a harder budget to deal.
So we try to get out in front of that as best we can typically at least 12 to 24.
Ann Mauer: Yeah. I mean, ideally if you have a checklist, something that you can look at your current environment, right. Identify the age of the gear. When is the, excuse me, when is it due to sunset? Right. And then planning for those replacement costs.
You know, that’s something that we, we want to be part of with our customers because you know, it’s, it’s better to plan for. Spend [00:23:00] today. And, and granted, there’s a lot of unknowns with where the market’s going today, but we have to be realistic in what that true number is to support the organization.
And be far more strategic, you know, honestly at the end of the day, technology should drive opportunity and business value. And, and when we’re dealing with, you know, legacy hardware and, you know kind of some inefficiencies based off running old gear, there’s soft costs. That’s involved there that if we just allocated correctly for a budget, To replace and move forward.
I think that there, that that soft cost with efficiencies and performance at the user level, that pays dividends, right? If, if you have somebody who’s consistently not having to deal with technology issues that there’s benefit there. And that’s really where we want our customers to get to at the end of.
Tara Klocke: That’s great. So we’re gonna be kinda wrapping up the podcast today. [00:24:00] Chris and Anne, do you have any like final words of wisdom that you wanted to throw out there for our listeners?
Chris Taylor: Yeah, I, I would just not be afraid of the budget. Right? Let, let get something established. It needs to start somewhere if you haven’t already.
And if you do have a budget established, I think it needs to be review reviewed at least annually. If not quarterly, we try to review with our customers on a quarterly basis to make sure you know, where are we at to that budget? Is it way under, is it way over? Where, where do we need to allocate? How do we accrue and get out in front of it?
So it’s, it’s, it’s. It’s not as scary as it sounds. I think it’s fairly easy to get started. We can give you some baselines industry stat type of numbers to use. And then from there we just build on it and make it better, bigger, better, faster,
Ann Mauer: stronger. Yeah. And I would, I would just also, I mean, there’s, again, what we’re seeing right now with supply and demand issues with core computing gear you know, just be patient, right.
It’s [00:25:00] it’s everyone in the industry is, is. Kind of struggling with this right now. And, you know, I think if you have allocated budget, you know, try to get those orders in sooner so that you at least are in the top of the line for when it, when that fulfillment is, is available. So.
Tara Klocke: Great. Well, thanks again, Chris and Ann.
So glad to have you on today. And it was a great discussion, so thanks for it, budgeting all the things and we got it all wrapped up. So I did wanna say let us know of any sort of feedback or additional topics that you would like to hear on our pod. You can visit C I net.com/podcast. Or you can email email@example.com.
And we look forward to chatting with you
Ann Mauer: guys next week. Thanks for rolling. Thanks.