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IT Budget vs. Company Revenue

By dmoufarrege ·
I am looking for some general guidelines on the size of an IT budget vs. company revenue.

I am trying to reset the expectations on what an IT budget should be.

My experience has been that a "proper" IT budget is somewhere between 5% and 10% ofrevenue.I need to be able to back that up. Can anyone point me to resources and research that can help with this?

Thanks,

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Different percentages

by generalist In reply to IT Budget vs. Company Rev ...

I recall hearing one to three percent.

I suspect that the number varies by industry. Knowledge based industries would probably be in the higher range that you quoted since IT investment directly impacts the bottom line.

On the other hand, certain manufacturing sectors can use lower figures because most of the cost is in producing the product.

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IT budget !

Hello
The IT budget is a very flexible term and conditions who is exert influence on IT industry as a working 'mashine' is very very changeable.
If you are planing make businnes in Europe you
should take into account the procesess of recession inthis field and many many other reasons for your final decision.

Kind Regards
Bogomil Shopov

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Couple of sources

by James R Linn In reply to IT Budget vs. Company Rev ...

Both Gartner Group and Informationweek spend a lot of time calculating this one - Information Week makes one issues a year out of it.

Of course it varies from sector to sector, and by what type of company you are; Gartner profiles companies by technology adoption profiles. Companies who want to use computing/information as a strategic tool spend more etc.

James

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by maxwell edison In reply to IT Budget vs. Company Rev ...

I saw where that very same question was asked at the following discussion forum:

Question:

http://cism.bus.utexas.edu/issues/issue65/issue65.html

Answer:

http://cism.bus.utexas.edu/issues/issue65/comment1.html

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Text of answer:

From Deloitte&Touche Survey Results:

The IT expenditure as a percent of corporate revenues seems to depend alot on the buissness sector which your company opperates. The latest information that I have is as follows.

For Financial Sector other than Banking 7.8% of revenue is spent on IT Budget.

For the Banking Sector the IT budget is 6.2% of revenue.

For the Transportaion Sector the IT budget is 2.4% of revenue.

For the Insurance Sector the IT budget is 2.0% of revenue.

For the Manufactuing sector the IT budget is 1.6% of budget.

For the Energy (Oil and Gas) sectore the IT budget is 1.1% of revenue.

For the Retail Sector the IT budget is .7% of revenue.

For the Distribution Sector the IT budget is .6% of revenue.

***** This information is from a document called "Leading Trends in Informaiton Services" which is the results of a North American Survey.

Some other things to keep in mind are:

1. that these numbers represent averages accross industry. You see wide variations in IT budgets within industry sectors.

2. What are included in IT budgets vary greatly depending on the company.

For Example, some IT departments include things such as Equipment depreciation and Occupancy costs in the IT Budget and some don't.

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More Answers:

http://cism.bus.utexas.edu/issues/issue65/iindex.html

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Maxwell

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Time warp

by MC_User In reply to

Dude,
Sorry to have to point this out but those figures are from 1995!

I'm doing research on the same question and came across the same survey.

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Gee - my life is a time warp

by maxwell edison In reply to Time warp

Thanks for pointing that out, Bob. I didn't notice that. (Too bad some of these Web pages don't have an expiration date!)

But being from 1995 isn't that bad. It sometimes seems that parts of my life are farther back than that, and are still having a hard time catching up.

Maxwell

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We're at .9% currently...

by TomSal In reply to IT Budget vs. Company Rev ...

Since we are a smaller company and our revenue is nowhere near even $100 million, our IT budget tends to fluctuate with our needs (based on meetings we have and our plans for the upcoming year) from as low as just .5% to our current high of .9% of annual revenues.

I never worked for a company with as high as 10%, that is an enormous amount in my opinion - no matter what size the company.

I worked for one fortune 500 company so far the had revenues at the time of about 1.2 billion (this was about 8 1/2 years ago) and they spent about 4.8 % on the IT budget - they were in the financial sector.


I guess it really goes by your needs and projected needs more than anything. I know for us now, we can't afford "inefficiencies" in budgeting so it has to be "tight" with little breathing room.

I suppose bigger companies can afford more breathing space and thus they can over budget with little "hurt" to the companies overall budget in general.

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Chemical Industry at .7%

by mbintl In reply to We're at .9% currently...

It all goes back to what is IT's role on the organization. Organizations where IT is an important part of the business such as companies that have a high % of sales online normally has a higher budget for IT. As a chemical industry we use IT to support the business and IT is more a cost than a competitive advantage...

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A little less than 1%

by admin In reply to Chemical Industry at .7%

is ours. I'm impressed that you both have it down to the tenth though! :)

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Industry differences

by timporter In reply to IT Budget vs. Company Rev ...

What type of company is the company you work for? The company that I work for has an IT budget around 8% of revenue. I think that is pretty low for our needs. We have a strong software development need. We are not a software company but we do develop different systems to deliver our content.

I am also curious what differences people think they're are for different stages of a company development. For example an early stage company may need more IT spending then a mature company.

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