Top 5 Drivers Shaping IT Budgets This Financial Year

Guest Writer: Louise Wallace, The Missing Link

As the new financial year approaches, it’s time for Australian small to medium-sized enterprises (SMEs) to focus on IT planning and budgeting. This is not just a routine task; it’s a critical step that bolsters business resilience and promotes growth.

In an environment marked by inflation, rapid technological advancement, talent shortages, cloud adoption, and cyber security threats, strategic planning is essential. The Missing Link simplify these complex factors, providing clear guidance to refine your IT strategies for the coming financial year.

1.    Economic Factors Influencing IT Budgets

Today’s economy is tough on SMEs, with high inflation and operational costs. Volatile financial markets and high interest rates make long-term planning difficult and expensive.

Fluctuating financial markets and high interest rates make long-term investment planning difficult and raise borrowing costs. These changes impact IT budgets, particularly affecting costs related to infrastructure maintenance and upgrades.

Strategies for IT Budget Optimisation

To mitigate these economic pressures, you can adopt several strategies:

  • Use Infrastructure as a Service (IaaS): Leverage to lower upfront costs and adjust expenses based on your business needs.
  • Review Existing Contracts: Negotiate vendor contracts to secure rates aligned with the current market and explore cost-reduction clauses.
  • Optimise Licencing: Conduct licence audits and software consolidation to cut unnecessary expenses.
  • Highlight IT Efficiencies: Track and show IT’s financial benefits with clear metrics.
  • Device Refresh Strategy: Plan device updates wisely to save costs without sacrificing tech needs.

By adopting these strategies, you can better navigate the pressures of the economic climate on your IT budget, ensuring they remain agile and competitive. In this process, IT strategy consulting can provide valuable insights to optimise your IT spending and align it with business goals.

Source: The Missing Link

2. The Rise of AI Technologies

Generative AI is transforming how businesses operate by automating tasks and improving decision-making. Tools such as ChatGPT and Copilot automate routine functions, analyse data, and help with coding. Integrating these tools into IT strategies encourages innovation and agility but requires careful budgeting due to upfront costs.

To harness AI effectively, consider the following key aspects:

Source: The Missing Link

By focusing on these areas, you can make the most of artificial intelligence. This will help you balance the initial expenses of adopting and learning the technology with its benefits, including more efficient operations and the opportunity to grow your business.

Research from Accenture reinforces this approach, indicating that AI could boost productivity by as much as 30% in certain industries. This could result in cost savings of roughly $140 billion by 2025, emphasising the critical role of AI in driving continuous success and innovation.

3. IT Talent Shortages

Despite recent shifts, Australia still faces challenges in filing certain IT roles. As the IT job market evolves, SMEs face challenges and opportunities to strengthen their workforce strategically. The focus should shift towards outsourcing roles where internal talent shortages continue, complementing efforts to enhance in-house capabilities.

Here’s how SMEs can effectively navigate IT talent shortages:

Source: The Missing Link

  • Outsourcing critical skills: Address internal talent shortages by outsourcing critical skills while simultaneously enhancing internal capabilities to maintain a balanced and resilient IT workforce.
  • Flexible Work and Benefits: Attract and retain top talent with flexible work options and development opportunities, going beyond competitive salaries.
  • Remote work: Expand the talent pool by adopting remote work policies, allowing access to a broader range of IT professionals not limited by geographic location.
  • Internal Training: Develop staff skills for future tech challenges, reducing reliance on external hires. This strategy complements short-term outsourcing, ensuring a balanced workforce approach.

Alignment of Talent and Projects

As the IT job market undergoes significant changes, there’s a prime opportunity for SMEs to attract skilled IT professionals, particularly in areas experiencing acute skills shortages. SMEs can offer unique advantages such as greater flexibility, a tight-knit work environment, and specialised opportunities, to appeal to top talent. With Australia’s tech sector projected to need an additional 445,000 technology-skilled workers by 2030, aligning your workforce with these evolving demands is crucial to alleviate pressure in critical roles.

The Missing Link understands your business’s challenges in adapting to these changes. By offering managed IT Support Services, they free your IT team to focus on strategic initiatives, boosting efficiency, driving innovation, and enhancing productivity.

4. Ongoing Migration to Cloud and SaaS Solutions

Businesses are increasingly adopting cloud computing and Software as a Service (SaaS) for flexibility, scalability, and cost savings. This shift allows companies to use software without investing heavily in on-site infrastructure.

To optimise financial planning in the cloud, consider these budgeting essentials:

  • Serverless Computing: Serverless computing cuts server costs by charging only for used resources, moving from capital to operational expenses.
  • Subscription Costs: SaaS can lead to recurring fees that may constitute a growing share of expenses.
  • Data Costs: Expect data transfer and storage costs to rise with increased usage.
  • Scaling Expenses: The cost of scaling cloud services can escalate in line with business expansion.
  • Backup and Recovery: Robust backup and disaster recovery are vital in cloud strategy to mitigate financial risks from downtime or data loss and should be included in cloud budgeting.
  • Strategic IaaS Savings: Opt for long-term IaaS contracts, such as Azure Reserved Instances, which offer reduced rates for one or three-year terms. This improves budget predictability for stable workloads.

By addressing these cloud budgeting essentials, you can effectively manage the shift to cloud and SaaS solutions, ensuring cost-effective scalability and operational resilience.

5. The Evolving Cyber Security Landscape

Cyber security has become a key concern for SMEs who operate online. As advanced security services have become more accessible and affordable, they offer tailored security measures that align with your specific needs and budget.

  • Strategic Investment in Security:
    Investing in solid backup and disaster recovery systems is crucial for maintaining business continuity during disruptions. These systems provide essential support and comply with the “Essential Eight” cyber security strategies recommended by the Australian Signals Directorate. This compliance ensures alignment with Australian business standards, reinforcing the security framework of your business.
  • The Dual Benefit of Regulatory Compliance:
    There’s an increasing focus on cyber security in the media, emphasising the importance of strong data protection. Australian businesses can avoid fines, build customer trust, and access international markets by following regulations like the Notifiable Data Breaches (NDB) scheme and the General Data Protection Regulation (GDPR).

Source: The Missing Link

Align your IT Budget for Future Growth

The rapid pace of digital change calls for SMEs to prioritise cyber security and strategic IT planning in your core operations. Doing so enhances resilience and growth and adheres to basic legal compliance, establishing trust signals with customers and unlocking new market opportunities.

A smart IT strategy, supported by a detailed maturity assessment, is essential. This strategy will enable you to:

  • Clearly understand your current technological capabilities,
  • Identify areas for improvement,
  • Ensure your IT initiatives are aligned with your boarder business goals.

Implementing these strategies effectively supports your business’s long-term success and positions you within the competitive tech landscape.

Ready to transform your IT budget for the new financial year?

As the new financial year approaches, The Missing Links’ Maturity Assessment Services are perfectly positioned to assess your current IT maturity level and provide a detailed roadmap for improvement. Together with The Missing Links’ IT strategy consulting, they’ll help you build a strong, future-ready IT framework that aligns with your fiscal planning.

To receive a customised IT strategy consulting and maturity assessment, get in touch with The Missing Link. The team will work with you to streamline IT operations and enhance your competitive edge, preparing you for next year’s challenges and opportunities.