What should our company be spending on technology? The obvious answer is, it depends. How important is technology to your business operations and business model? How important is technology availability to you? Are you dependent on technology to create efficiencies to reduce staffing costs? Most likely your answers make you highly dependable on technology. This dependency changes the conversation from what do I spend to what should I spend? You will want to calculate the historical cost of technology to include hard costs (checks you write) and soft costs (time and energy spent). Here is a link to a template that you can use to help you get started.
The above process will help you determine what is spent on technology. Now to benchmarking or what should our company be spending? The simplest way is to take a percentage of revenue matching your business model with an industry. This will give you a high level view. The goal is to find out if your company budget is correct for the industry or if it needs further review. Gartner group is an IT research firm that tracks global IT trends. Their key metrics in IT spending by industry is an easy way to determine if further discussion is needed.
- Construction materials – 1.2%
- Retail Wholesale – 1.4%
- Industrial Manufacturing – 1.9%
- Transportation – 3.1%
- Medical Products – 3.3%
- Telecommunications – 3.9%
- Professional Services – 4.5%
- Media Entertainment – 4.5%
- Education – 4.7%
- Financial Services 6.0%
Again these are worldwide numbers and are all inclusive. In the Midwest most likely companies are going to find themselves considerably less than the worldwide number. If you find that your company is spending under 25% of the worldwide number it is reasonable to determine that you are putting something at risk. Most likely it is some piece of infrastructure or efficiency. As a second opinion it is probably a good idea to contact your industry association to see if they have additional information. Spending between 25% to 50% of worldwide number indicates that your company invests in technology but opportunity still exists to gain a business advantage over your peers. Above 50% means your company has identified technology as a priority and shifts the conversation to return on investment. I hope this provides some valuable discussion within your organization.