IT Budgeting 2026-2029: Calculate Your Actual Spend and Build Your Plan

Introduction

You probably don’t know how much IT actually costs your company. Not because you’re not paying attention—but because IT costs are scattered across invoices, contracts, salaries, and hidden subscriptions. A software license here. A support contract there. Hardware replacement budgets. Training costs.

This guide shows you how to gather your actual spend, break it down by category, calculate your per-user monthly cost, and then build a realistic three-year plan from there.

The key insight: IT spending varies wildly by company type, strategy, and industry. Rather than telling you what you “should” spend (which would be meaningless), we’ll show you how to understand what you’re actually spending and whether it makes sense.

Part One: Gathering Your Actual Spend

The Seven Cost Categories

All IT spend falls into seven buckets. Gather your actual numbers for each.

1. Hardware and Equipment (Kit)

Budget using one of two methods:

Method 1: Three-Year Average

Add up what you actually spent on hardware in the last three years, divide by 3. That’s your annual budget.

Example: Spent £8,000 (2022), £9,500 (2023), £7,200 (2024). Average: £8,233/year = £686/month.

Method 2: Replacement Cost ÷ 3

Identify all equipment needing replacement (workstations typically last 4-5 years, servers 5-7 years). Calculate what it would cost to replace everything. Divide by 3.

Example: 20 workstations (£1,200 each) + 3 servers (£4,000 each) + network gear (£3,000) = £31,000 total. Divided by 3 = £10,333/year = £861/month.

Why divide by 3, not 4-5? Because real-world: emergency replacements, unexpected failures, budget buffer. You’re budgeting to replace roughly one-third of your fleet annually—sustainable and realistic.

Use whichever method reflects your actual situation. If your three-year average seems low, Method 2 probably reveals deferred maintenance.

2. Software Licenses and Subscriptions

Microsoft 365, CRM software, accounting software, industry-specific tools, security software licenses, design tools, communication platforms.

What to find:

• Every subscription you pay for (monthly or annual)
• Annual license renewals
• SaaS subscriptions
• Site licenses

Quick audit method:

• Check password manager (list of all active subscriptions)
• Search credit card statements for “subscription,” “renewal,” “.com”
• Check vendor portals (Microsoft, Salesforce, Adobe, etc.)
• Ask each department head: “What software do you pay for?”

Real example costs (per user, annual):

• Microsoft 365: £55-240/user/year (depending on tier)
• Google Workspace: £48-240/user/year
• Salesforce: £120-300+/user/year
• Slack: £72-180/user/year
• Zoom: £120-300/user/year
• Adobe Creative Suite: £180-600/user/year

3. Cybersecurity and Insurance

Endpoint protection, firewalls, email filtering, intrusion detection, managed security services, cyber insurance, compliance audits.

What to find:

• Cyber insurance annual premium
• Security software licenses (antivirus, endpoint detection, SIEM)
• Managed security service provider costs
• Penetration testing or compliance audit costs
• Security hardware (firewalls)

Real example costs:

• Cyber insurance: £5,000-50,000/year depending on company size
• Managed antivirus: £10-50/user/year
• Email security: £20-100/user/year
• Managed firewall: £2,000-20,000/year
• Penetration testing: £5,000-20,000 per test

4. IT Support and Helpdesk

Internal IT staff, managed service provider, break-fix support, on-call support, vendor support contracts.

What to find:

• IT staff salaries (internal team)
• Managed IT services provider fees
• Per-incident support contracts
• Vendor support contracts
• Warranty support beyond hardware warranty

Real example costs:

• Internal IT staff: £35,000-80,000/person/year (depending on role and location)
• Managed IT services: £80-300/user/month (varies by scope)
• Per-incident support: £150-500 per incident
• Break-fix support: hourly rates £80-250/hour

5. Training and Knowledge Management

Staff training on new systems, documentation, learning management systems, onboarding materials.

What to find:

• Training budget lines
• External training course fees
• LMS (Learning Management System) subscriptions
• Trainer time (internal staff training others)

Real example costs:

• External training course: £500-2,000 per person per course
• LMS platform: £5,000-30,000/year
• Vendor certification training: £1,000-5,000 per person

6. AI and Innovation

AI tools, automation platforms, proof-of-concept projects, emerging technology pilots.

What to find:

• AI subscriptions (ChatGPT, Copilot Pro, Claude Enterprise)
• Automation platforms (Zapier, n8n, RPA tools)
• Analytics and BI platforms
• Innovation pilot budgets

Real example costs:

• ChatGPT Plus: £15-20/user/month
• Microsoft Copilot Pro: £20/user/month
• Claude Enterprise: negotiated per company
• Automation platforms: £100-1,000/month depending on scale
• BI/Analytics tools: £50-500/user/month

7. Projects and Infrastructure Improvements

Major implementations, migrations, system replacements, office relocations, infrastructure upgrades.

What to find:

• Project budgets (active and completed)
• Implementation consulting costs
• Data migration costs
• System replacement projects

Real example costs:

• CRM implementation: £50,000-500,000+ depending on scope
• Cloud migration: £30,000-200,000+
• Office network upgrade: £10,000-100,000+
• Legacy system replacement: £20,000-1,000,000+

Part Two: Calculate Your Actual Monthly Cost Per User

Building Your Spreadsheet

Create a simple spreadsheet with your costs:

Total Annual Cost = All Categories Combined

Once you have the total, do the math:

Monthly cost per user = Total Annual Cost ÷ Number of Staff ÷ 12 months

What This Means:

Notice that per-user monthly costs don’t drop dramatically with company size because:

• Small company: Higher percentage spent on core support (1 person for 15 people is expensive per-user)
• Large company: Lower percentage per-user but same essential costs (firewall costs the same whether protecting 15 or 250 people)

Part Three: Understanding Your Breakdown

Percentage Analysis

Once you know your total and per-user costs, look at your percentage breakdown:

What to watch for:

If Support is >55% of budget: You’re spending heavily on staff or managed services. This is normal for complex needs, but ask: “Is this sustainable?”

If Hardware is <5% of budget: You might be deferring equipment replacement, which creates future crises.

If Cybersecurity is <8% of budget: You might be under-investing in security. Recommended minimum is 10-15%.

If Projects is <5% of budget: You’re probably not modernizing. Legacy systems stay legacy.

If you have 0% in AI/Innovation: You’re not investing in competitiveness.

Part Four: Three-Year Planning

How Costs Change Over Time

Your monthly per-user cost doesn’t stay static. It changes based on:

Year 1: Foundation building

• Higher hardware spend (replacing old equipment)
• Higher project spend (migrations, implementations)
• Normal support costs
• Typical increase: 5-20% above baseline

Year 2: Consolidation

• Lower hardware spend (replacements over, not emergency purchases)
• Lower project spend (migrations complete)
• Normal support costs
• Typical baseline year

Year 3: Optimization

• Normal hardware spend (steady-state replacement)
• Optional innovation spending
• Possibly lower support costs (if newer systems)
• Typical baseline or slight decrease

Key Decisions That Move The Costs

Decision 1: Cloud vs. On-Premises Infrastructure

This single decision often changes monthly costs by 30-50%.

Cloud (OPEX): Infrastructure £5-20/user/month, minimal staff needed.

On-premises (CAPEX + OPEX): Infrastructure staff alone £100-250/user/month higher.

Decision 2: Consolidate or Duplicate Licenses

Do you have both Microsoft 365 AND Google Workspace? Multiple CRM systems? Each duplicate is pure waste.

Decision 3: Managed Service vs. Internal Staff

Under 50 people, often managed service wins. Over 150 people, internal staff wins.

Decision 4: Invest in Security

Cybersecurity isn’t optional. Budget 10-18% of total IT spend.

Part Five: Reducing Your Costs

Find the Quick Wins

Software audit: List every subscription, check how many people use each, kill the ones nobody uses. Potential savings: 15-25% of license spending

Lease audit: List every equipment lease, calculate would buying be cheaper? Potential savings: £5-30k/year

Hardware consolidation: Standardise on 2-3 workstation models, negotiate volume pricing. Potential savings: 10-15% of hardware cost

Duplicate tools: One CRM, not three. One communication platform, not five. Potential savings: 10-30% of license spending

Frequently Asked Questions

Next Steps

1. Spend 2-3 hours gathering your actual costs across the seven categories
2. Calculate your per-user monthly cost using the formula provided
3. Look at your percentage breakdown and ask where you’re out of line
4. Plan three years forward knowing what you actually spend
5. Address the obvious waste first (duplicate tools, bad leases)

Need help with this analysis? GoodChoice IT can conduct a comprehensive IT spend audit and help you build your three-year budget plan.

Related Resources:

• How Much Do Managed IT Services Cost for UK SMEs?
• The ROI of Fractional CIO Services
• Virtual CIO Services
• What Happens If You Ignore IT Strategy for a Year?