How much should our ICT budget be?

Many organisations don’t have an ICT budget, and if they do it’s not always clear where the money will actually come from. They may rely on fundraising for new computer equipment, use underspend at the year end, or only replace equipment when it is broken, hoping the money will be there when it’s needed.

It is important to see ICT as a vital part of an organisation’s running costs, similar to other overheads such as rent, salaries and the photocopier. As an organisation becomes increasingly dependent on ICT, a more planned system of allocating an appropriate amount for ICT each year is needed.

The first part of the budgeting process consists of deciding what needs to be spent to get the right ICT and keep it working. Of course, the figures produced first time may be far too high, so you’ll need to work with them as you would with any budget, bringing them into line with what you think you can afford.

You may have grand ambitions but it is also important to be realistic about where the money will come from:

• Will ICT be a part of every funding application? It should feature in most of them.
• Can you build ICT into your core costs and other projects you prepare bids for?
• Will specific ICT developments be funded as one-off projects in their own right?
• Will your ICT initiatives save money by making operations more efficient?

It would be great if you could answer yes to all of these.

How much to spend?

The cost of all computer equipment changes quickly over time, so it’s not possible to make specific suggestions about prices that won’t go out of date. You have to draw up a list of what you think you need, shop around to get a range of prices, and make a choice between the basic, cheaper options and the latest, fastest choices available at a higher price.

Many organisations use round numbers such as £500 and £1,000 when including a line for ICT in their funding bids. This is a convenient way of working in the initial stages, but it needs to be refined during the budgeting process, otherwise it can easily leave budgets too small to be realistic.

Another way of considering how much to spend is to look at the value you think ICT can bring to your work. Does ICT play a marginal role in your organisation? In which case, 10 per cent of your total budget may be adequate. Or perhaps it’s the bedrock of your administration, or a way of delivering innovative services that will attract new funders and partners?

A business will expect to repay its investment through increased profits, and may only decide to invest if it thinks it can be repaid within five years. A not for profit organisation needs to justify larger ICT investments by looking for savings in operational costs, increased productivity or improvements in the effectiveness of a service over the next three to five years.

When it comes to hardware you must also allow for wear and tear, upgrades and repairs. Some businesses overhaul or replace ICT systems every three years, but it is more realistic for VCOs to think in terms of a useful life of four or five years. Much ICT equipment will function beyond this point, but this is a good benchmark when looking at the initial costs of purchase and the ongoing cost of upgrades, maintenance, replacement and repairs.

Buying ICT: where to start

• Decide what your organisation wants to do.
• Choose the software you need to enable you to do what you want.
• Choose the hardware to run the software.

Leasing

Leasing has some attraction in that it usually includes a maintenance contract and can spread the purchase cost over several years. However, even though the monthly payments made in the first two years could cover the cost of the machine, you often have to return the PC after that time, or continue paying after the lease period ends. This can make leasing more expensive in the long run. Some PC vendors, such as Dell and others, offer a hire purchase option which allows you to spread the costs over a given period, and own the product at the end of this term. The total cost may be higher over the term of the lease, but you avoid large upfront payments.