For CFOs and CEOs, this isn’t just a budgeting exercise—it’s a risk, growth, and accountability question. If you spend too little, the business falls behind. But if you spend too much, you’ll be asked to justify every line item.
While industry benchmarks can be helpful directionally, Greg Tselikis, Technology Director of Technology Advisory Services at SC&H, says they shouldn’t be the starting point.
“The key thing to think about is: Is the company in downsize, maintain, grow, or transform mode? That’s the number one factor in determining whether you should spend a larger or smaller percentage on IT.”
In other words, a strong IT budget starts with business intent, not percentages.
Start with a strategy, then get into numbers
Before pulling up a spreadsheet, get your IT team and department leaders on the same page about which mode the business is in (downsize, maintain, grow, or transform).
Many organizations make the mistake of letting their current mode drive reactive IT decisions. But a more effective approach is to define how IT strategy should support the business’s direction, then build the budget accordingly.
Once that strategic alignment is in place, benchmarks can serve as helpful guardrails, not targets.
As a general reference point:
- Low end: 3%. Less tech mature or downsizing companies.
- Middle: 3-6%. This is where most stable, mid-sized organizations fall.
- Higher end: 8-10%. Reserved for tech-forward or rapidly growing companies.
The right number depends on your company’s size, industry, technology maturity, and—most importantly—its mode.
What to include in the budget & how to categorize
To avoid surprises later, CFOs need full visibility into everything that touches IT spend, including:
One item that frequently flies under the radar?
- Shadow IT. These are tech tools, apps, or subscriptions that are purchased by departments other than IT. Think: Marketing buys sweepstakes software for a social media campaign and expenses it from their budget, so the tech team doesn’t know about it.
Categorize spending to see what your budget is really doing
After you’ve created a comprehensive list, categorize each line item into one of these three buckets:
- Run the business (~70%): Core systems and services that keep operations running day to day.
- Grow the business (~20%): Investments that support expansion, hiring, new locations, or new markets.
- Transform the business (~10%): Innovation, experimentation, and emerging technologies.
This view helps CFOs clearly see where dollars are going, and whether spending aligns with the company’s stated goals and mode.
The bottom line
Modern CFOs need to know what’s in the IT budget and why it’s there. Aligning IT spending to business strategy makes it easier to defend, easier to manage, and far more effective at building long-term resilience and innovation.
For those exploring strategic IT budgeting in more depth, see Greg’s full blog: The CFO’s Guide to Building an IT Budget (including a FREE budgeting workbook with real-world examples).
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