Where Small Businesses Can Cut Costs in Their 2024 IT Budgets

For small businesses with limited financial resources, it's critical to spend every technology dollar wisely. The latest research by Spiceworks comparing IT budgets across company sizes reveals some potential areas where SMBs may be able to reduce costs without sacrificing performance or productivity.

Avoid Overspending on Hardware

The data shows small businesses (under 100 employees) allocate a hefty 24% of their IT budgets to hardware, far outpacing the 16% spent by large enterprises. Small firms are especially heavy hardware investors when it comes to laptops, which make up over one-quarter (26%) of their hardware budgets on average.While having a modern, mobile-friendly laptop fleet is important, that level of hardware spending may be excessive for some SMBs with less demanding computing needs. Big companies are likely achieving greater economies of scale on hardware purchases.

The Opportunity: Evaluate whether your laptop and desktop refresh cycles can be extended an extra year or two. Also consider lower-cost devices like Chromebooks for basic tasks.

Be Prudent with Telecom Spending

Telecommunications is one area where SMBs seem to be overspending compared to enterprises. The data shows small businesses devote 39% of their telecom budgets to internet service providers versus just 27% for large companies. Conversely, only 13% of SMB telecom spending goes to wide area networking (WAN) services compared to 21% for enterprises.

The Opportunity: Audit telecom contracts and provider billing to identify potential savings on internet, phone line, and WAN services that may be overprovisioned for your company's actual requirements.

Minimize Facilities Costs

Another spending category showing major divergence is facilities, where small businesses allocate over one-quarter of their budgets to utilities (28%) and power/climate control (26%). Those percentages drop to 14% and 16% respectively for large enterprises, likely due to economies of scale.

The Opportunity: Explore opportunities to reduce energy consumption through practices like decommissioning unused servers, leveraging efficient cloud infrastructure, and optimizing lighting, cooling and climate control systems.

 Leverage Public Cloud Infrastructure

While SMBs spend considerably more than enterprises on on-premises hardware and facilities costs, they allocate significantly less (8%) to data center expenses like racks, cabling and physical infrastructure. By shifting more workloads to public cloud platforms, small businesses can reduce these data center expenditures.

The Opportunity: Accelerate migration of applications, websites, development environments and data stores to public clouds like AWS, Microsoft Azure and Google Cloud. SMBs are already ahead of enterprises in leveraging cloud-based web hosting.

Be Strategic with Internal Services

A final area where SMBs appear to be spending inefficiently is internal services. Only one-third (33%) of small businesses allocate any budget for activities like IT showback/chargeback compared to 72% of enterprises. This may indicate lack of emphasis on resource optimization.

The Opportunity: Consider implementing processes and tools to increase cost transparency across IT resources and services.  This can improve accountability and rightsizing of investments.While every small business has unique needs, budget constraints make it imperative to continually evaluate whether technology spending is aligned with priorities. The benchmarks provide a helpful starting point for identifying potential areas of overspending compared to industry norms. Even small reductions can provide much-needed savings to invest elsewhere.

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