What is the approximate IT budget as % of revenue?

By raichel ·
I manage an IT department of health care financial service organization around 150 employees with a total revenue about 12 million US dollars.
Even though we are in a very IT oriented industry, overall IT knowledge in the company is behind the curve which puts more demand to my department. Also, technology used in the company from a software and hardware perspective is near the end of their life cycle as well. On the top, we are growing at a 50% rate and will continue to grow.
With this scenario, could anyone tell me what should be the IT spending as a % of revenue.

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What you are asking for is impractical ...

by OldER Mycroft In reply to What is the approximate I ...

Because 'Total Revenue' is a projected figure.

But 'IT spending' is a factual financial cost.

Sorry, but you cannot calculate an actual spend as a percentage of something that doesn't actually exist.

Just my opinion mind.

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The best you can do

by JamesRL In reply to What is the approximate I ...

The Gartner group does spending studies, and will sell you data, but it won't be cheap.

The advantage of it is that they will have breakdowns by SIC code so you can compare yourself against similar companies.

Gartner classifies companies in 3 catagories - Type A companies use IT as a strategic adavntage, Type B are mainstream, and Type C lag their peers and try to spend as little as possible.

But in the end, your growth factor is a wild card. If you compare yourself against companies that are not growing wildly, your costs will likely be higher.


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Base cost on per user

by NotSoChiGuy In reply to What is the approximate I ...

As Old Mycroft pointed out, basing the IT budget on future projected earnings is a sketchy proposition; as it includes too many variables to reasonably accommodate for the sake of planning.

What you can do, though, is base the IT budget on a per user basis. Figure out what it costs to sufficiently support one user (combination of equipment, licenses, training and avg. # of support hours x avg. $$$ of support personnel on hourly basis). Then speak with HR to get projections on head count (any HR department worth their salt will have an approximate idea of how many people they intend to hire/have on board by year end). From there, you can get an idea of what the minimum amount of $$$ you'd need would be.

Add in realistic numbers for capital improvements (replacement/addition of servers, network equipment, A/V equipment, telephony) and some 'just in case' padding, and you should be able to come up with a pretty good financial number.

From my experience, the two key benefits from this are that you're using fairly firm logistics to justify your budget (bean counters like solid math) and that if you are experiencing exponential growth, the economy-of-scale can kick in, and you can start decreasing the $$$ per user across the board (lowering costs via bulk purchasing), meaning you may end up with a budget surplus at the end of the year (barring unforeseen circumstance and assuming your head count #'s were relatively close to actual).

There are downsides, as well (especially if they don't allow you to add headcount to your staff or equipment necessary to support such rapid expansion); so the real trick is figuring out a good dollar number you can work with, and sell to your execs and accounting team.

Best of luck!

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by lfh003 In reply to What is the approximate I ...

In the end, if you have to supply a budget, the ROI factor will raise it's head. The per-user cost is never a practical framework for determining budget...charging departments for usage can help overcome objections from the CIO about the 'bottom line' and the CIO knows this. Also, currently, you say that the end-of-cycle time is approaching: that's not good news, financially. Your budget will skyrocket. Your CIO, if your company has one, is your best business partner. He/she had better be completely up to date on your situation...let them handle the heat.

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Revenue %

by anthony.d.terry In reply to What is the approximate I ...

Typically organisations work between 4-6% typical IT Spend "V" overall revenue.

We like you are a very IT driven firm based in the UK and find most companies over here operate on a similar scale.

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Benchmark data

by andytech79 In reply to What is the approximate I ...

Overall it is 5-10% of total budget that includes both OPEX and CAPEX but it very much depends on industry and in your case it could be driven by compliance requirements as well. The key is to divide both CAPEX and OPEX and then use the historical/benchmark data as much as you can get.
You can find interesting articles related to that at,


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