How Smart Businesses are Budgeting for Technology in 2025
Why a Smart Technology Budget is Critical
Industry Benchmarks: How much Do Businesses Spend on IT?
How Much Should Technology Cost Your Business?
Key Technology Trends Impacting Budgets in 2025
How to Control IT Costs Without Compromising Quality
Conclusion: Budgeting Intelligently for a Resiliant technological Future
Insights, Benchmarks, and Practical Steps for Smarter IT Spending
Introduction: The Critical Role of Technology Budgeting
In today’s rapidly evolving digital landscape, technology spending is no longer a luxury—it’s essential for survival and growth. The pace of digital transformation, escalating cybersecurity risks, and ever-changing customer expectations mean that businesses must strategically allocate their resources to stay competitive and efficient.
According to leading studies by Avasant and Flexera, companies across various industries allocate 4%–8% of their revenue to technology. For tech-driven or compliance-heavy industries, this allocation can surge to 10%–20% of revenue.
Are you budgeting for technology as a cost or as an investment in your business’s future?
In this blog, we'll explore how smart businesses are budgeting for technology in 2025, providing insights, benchmarks, and practical steps to optimize your IT spending for maximum impact.
Why a Smart Technology Budget is Critical
Technology = Business Growth
Modern IT investments are the backbone of business growth. From enhancing operational efficiency and scalability to gaining a competitive advantage, strategic technology spending drives every facet of a successful business. Companies that prioritize their IT budgets are better positioned to innovate, adapt, and thrive in a dynamic market. Deloitte refers to this metric as “Digital Maturity” and explains its connection to and impact on financial performance (Source).
Rising Costs of Inaction
Neglecting technology budgeting can lead to outdated systems, increased cybersecurity vulnerabilities, and inefficient operations. Over time, these issues accumulate, resulting in higher costs and lost opportunities. Investing in technology today can prevent expensive setbacks tomorrow.
Lesson: Sometimes, the "cheaper" option costs more in the long run. Proactive technology investments lead to savings and efficiency.
Example: To save money upfront, Company X purchased a $300 printer. The printer experienced frequent issues, requiring an IT provider to spend 6 hours working on it over the course of its lifespan, at $125/hour. The true cost of the "cheaper" printer ended up being $1050. If Company X had invested in a higher-quality $500 printer initially, it would have been far more reliable, requiring only 2 hours of IT work. This would have saved the company $300 in the long-run.
Industry-Specific Challenges
Different sectors face unique pressures and opportunities that influence their technology budgets. Whether it's regulatory compliance in healthcare or automation in manufacturing, understanding your industry's specific needs is crucial for effective IT spending and budgeting.
Industry Benchmarks: How much Do Businesses Spend on IT?
General Benchmark
Across industries, IT budgets typically range from 4%–8% of total revenue. This allocation ensures that businesses can maintain their current operations while investing in future growth and innovation.
Tech-Driven and Regulated Industries
For industries that rely heavily on technology or face strict regulatory requirements, IT budgets can reach 10%–20% of revenue. These sectors prioritize advanced technologies and robust security measures to meet their unique demands.
“Worldwide IT spending is expected to total $5.74 trillion in 2025, an increase of 9.3% from 2024”
Benchmark by Industry
Hospitality (6%–8%)
Focus: Guest-facing technologies, sustainability, and operational efficiency.
Healthcare (8%–12%)
Focus: Telemedicine, cybersecurity (HIPAA compliance), and AI diagnostics.
Oil & Gas (3%–5%)
Focus: Automation, predictive maintenance, and ESG technologies.
Pro Tip: Compare your current IT spending to these benchmarks. Are you underinvesting or over-allocating? Aligning your budget with industry standards ensures you're competitive and prepared for future challenges!
How Much Should Technology Cost Your Business?
When planning your technology budget, a good rule of thumb is to allocate 3%–12% of your revenue toward technology expenses, depending on your industry and specific business needs.
Oil & Gas: Typically spend 3%–5% of revenue on technology.
Healthcare: Often require 8%–12% due to software dependencies and strict regulatory compliance (e.g., HIPAA).
For example, if your business generates $10 million in annual revenue, you should anticipate spending at least $300,000 per year on technology at the lower end of the spectrum.
“The global IT spending in the oil and gas market is expected to grow at a CAGR (compound annual growth rate) of 4.2% from 2021 to 2030.”
How Our Services Fit Into Your IT Budget
Scenario 1: Standard IT Management
Let’s say your business operates with:
100 endpoints
4 servers
6 managed network devices
Our company can act as your full-time IT department for as little as ~$11,000 per month (or ~$132,000 per year). Even with our premium services contract, your total IT management costs would remain well under $250,000 annually—far below the 3% baseline for businesses with $10M in revenue.
Scenario 2: Upgrading IT Infrastructure
If your business also requires hardware upgrades (e.g., replacing 50% of your equipment) at an additional ~$100,000, we can amortize this cost across a 3-year contract on a phased implementation schedule.
Annual cost, including premium IT services: < $300,000 per year
This still aligns with the 3% technology budget benchmark, ensuring comprehensive IT management and upgrades while remaining cost-effective.
Other Technology Considerations
It’s important to recognize that IT management is just one part of your technology budget. Additional expenses include:
Phone & Internet Systems
ERP, POS, and other software solutions
Printers and service contracts
Utilities (Electric & HVAC for Data centers)
Web Design, Hosting & Management
Every business is unique, and navigating these costs can be complex. That’s where we come in—our team helps you build a tailored IT strategy that fits your needs and budget while maximizing efficiency and value!
Key Technology Trends Impacting Budgets in 2025
Digital Transformation
Digital transformation is when a company replaces manual processes with digital tools to improve efficiency, such as using automated software to manage inventory instead of tracking it in spreadsheets. It can also mean using data analytics to understand customer behavior and offer personalized services without all the guess work.
Investments in Artificial Intelligence (AI), automation, cloud migration, and data analytics will be pivotal. These technologies drive efficiency, enhance decision-making, and enable businesses to scale seamlessly.
Cybersecurity as a Non-Negotiable
Cyber threats are no longer an occasional risk—they’re a daily challenge for businesses globally. Investing in robust cybersecurity isn’t just about protection; it’s about ensuring your operations stay secure, your data stays private, and your reputation stays intact. In today’s digital economy, cybersecurity is the foundation for trust, resilience, and growth.
Artificial Intelligence (AI) Integration
AI continues to be a major focus, with enterprises embedding AI capabilities into core operations. IDC forecasts that worldwide spending on AI-supporting technologies will surpass $749 billion by 2028, with 67% of the projected $227 billion AI spending in 2025 coming from such integrations. (Source)
Cloud Infrastructure Expansion
The shift towards cloud solutions continues, driven by the adoption of multi-cloud and hybrid environments. This expansion supports scalability and operational efficiency, prompting businesses to allocate more budget towards cloud infrastructure.
How to Control IT Costs Without Compromising Quality
Adopt Subscription Models
Utilize Software-as-a-Service (SaaS) for flexibility and cost control. Subscription models allow you to scale services up or down based on your needs, reducing upfront costs and ensuring you only pay for what you use.
Leverage Managed Services
Outsource IT management to a Managed Service Provider (MSP). This approach reduces in-house IT costs while providing access to expert support and advanced technologies.
Streamline Vendors
Consolidate your software and service providers to simplify management and negotiate better rates. Fewer vendors mean easier oversight and potential cost savings through bulk agreements.
Invest in Training
Maximize the ROI of your current tools by training employees to use them effectively. Well-trained staff can utilize technology more efficiently, reducing the need for additional investments.
Conclusion: Budgeting Intelligently for a Resiliant technological Future
Strategic IT budgeting is pivotal for leveraging technology as a catalyst for business growth and resilience. By aligning your budget with industry benchmarks, prioritizing high-impact investments, and adopting a proactive approach, you can ensure your business thrives in the digital age.
Prioritizing technology budgeting is not just about preventing losses—it’s about empowering your business to innovate, compete, and succeed in an increasingly technology-driven world.
Ready to Optimize Your Technology Budget?
Don’t let ineffective budgeting hold your business back. Partner with us to develop a comprehensive technology budget that aligns with your strategic goals and prepares you for the future.
Contact Us Today for a Technology Budget Consultation!
Call Us: 432-620-9457
Email: help@extsys.com
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External Systems USA Inc.—Your Trusted Partner in Strategic IT Solutions.
Empowering your business with smart technology budgeting for a prosperous and secure future.
