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IT Budget Breakdown by Category

How a well-structured IT budget allocates across five core categories, with recommended percentages, what is included, warning signs, and optimisation opportunities.

Recommended Allocation

IT Personnel 28-32%
Software and SaaS 26-30%
Infrastructure 20-24%
Security 10-14%
Support and Maintenance 7-10%

IT Personnel

Recommended

28-32%

Typical range

25-35%

The largest single category in most IT budgets. Covers salaries, benefits, contractors, and managed service provider fees. This is where strategic capability resides - underinvesting creates skills gaps; over-investing without the right roles creates waste.

Includes

  • +Internal IT staff salaries and benefits
  • +Contractors and managed service providers
  • +Training and certifications
  • +IT recruitment costs

Red Flags

  • !Single person responsible for multiple critical functions (key person risk)
  • !IT staff spending more than 50% of time on reactive support tickets
  • !No training budget for certification renewal

Optimisation

Audit time allocation before adding headcount. Automation and tooling often recovers 20-30% of IT staff time from repetitive tasks.

Software and SaaS

Recommended

26-30%

Typical range

20-35%

The fastest-growing category for most organisations. SaaS spend typically grows 15-25% per year without active management due to team purchases, auto-renewals, and shadow IT. Visibility is the first problem to solve.

Includes

  • +Business SaaS applications (CRM, HR, finance, project management)
  • +Developer tools and CI/CD platforms
  • +Productivity and collaboration suites
  • +Data, analytics, and BI platforms

Red Flags

  • !No central inventory of all SaaS subscriptions
  • !Multiple overlapping tools serving the same function
  • !Auto-renewals for underused or abandoned licences

Optimisation

An annual SaaS audit typically finds 20-30% of licences are underused. Review 90 days before renewal for maximum negotiation leverage.

Infrastructure

Recommended

20-24%

Typical range

15-30%

Cloud infrastructure, data centres, networking, and hardware. Cloud spend now represents 45% of most IT infrastructure budgets and is the fastest-growing component. Without FinOps practices, cloud costs can spiral 30-50% over plan.

Includes

  • +Cloud provider spend (AWS, Azure, GCP)
  • +On-premise servers and data centre costs
  • +Network and connectivity costs
  • +Endpoint hardware (laptops, mobile devices)

Red Flags

  • !Cloud spend growing faster than headcount or revenue
  • !No cloud cost visibility or FinOps tooling
  • !Significant over-provisioned compute or storage

Optimisation

Reserved instances and committed use discounts reduce cloud costs by 30-40% vs on-demand. Rightsizing idle resources saves a further 10-20%.

Security

Recommended

10-14%

Typical range

6-18%

The most commonly underfunded category. Many organisations spend 6-8% on security and believe they are adequate until an incident proves otherwise. SMBs now average 14.8% (up from 10.2% in 2022) driven by ransomware threats and cyber insurance requirements.

Includes

  • +Security tools and platforms (EDR, SIEM, WAF, CASB)
  • +Penetration testing and security assessments
  • +Security awareness training for all staff
  • +Cyber insurance premiums

Red Flags

  • !Security spend below 10% of total IT budget
  • !No annual penetration test or security assessment
  • !No security awareness training programme

Optimisation

Consolidating security vendors reduces cost by 15-25% and improves coverage through better integration. Many companies run 20+ point solutions with overlapping coverage.

Support and Maintenance

Recommended

7-10%

Typical range

5-15%

Vendor support contracts, hardware maintenance, and break-fix costs. This category tends to grow as the technology estate ages. Organisations with significant legacy systems often see this reach 15-20% of IT budget, crowding out innovation spend.

Includes

  • +Software vendor support and maintenance contracts
  • +Hardware maintenance and extended warranties
  • +Break-fix support for on-premise equipment
  • +Legacy system maintenance costs

Red Flags

  • !Support costs growing as a percentage of IT budget year-on-year
  • !Legacy systems with vendor support end-of-life approaching
  • !No plan to retire or replace high-maintenance systems

Optimisation

Technical debt remediation programmes often reduce maintenance costs by 20-40% over 2-3 years, freeing budget for strategic investment.

Cybersecurity Budget Guide

Detailed security allocation benchmarks and mini calculator.

Cloud Spending Benchmarks

45% of IT budgets now going to cloud. How to optimise.

IT Staffing Cost Benchmarks

Personnel is 28-35% of IT budget. Team sizing by company size.

Frequently Asked Questions

How should an IT budget be broken down?
A well-structured IT budget allocates approximately: personnel (28-32%), software and SaaS (26-30%), infrastructure (20-24%), security (10-14%), and support and maintenance (7-10%). These percentages shift based on company size, industry, and maturity. Small businesses lean more heavily on software and SaaS (cloud-first tools) and less on personnel. Larger enterprises have more personnel and infrastructure costs. Regulated industries should allocate 15-18% to security.
What is the biggest IT budget category?
IT personnel is the largest single category, typically representing 28-35% of the total IT budget. This includes internal IT staff salaries, contractors, and managed service provider fees. At mid-market and enterprise scale, personnel can exceed 35-40% of IT spend as organisations build sophisticated IT departments. Cloud costs are now the second-largest category at midsize companies, driven by the rapid shift from on-premise infrastructure to cloud services.
Is 10% of IT budget enough for cybersecurity?
10% is the minimum threshold recommended by most security frameworks, and SMBs now average 14.8% of IT budget on security. For most organisations, 10-15% is appropriate. Regulated industries (financial services, healthcare, government) should target 15-18%. If your security spend is below 10%, you are likely exposed to risks that are not fully visible. A single ransomware incident can cost 20-50x the annual security budget in recovery, downtime, and remediation costs.
What percentage of IT budget should go to cloud?
Cloud infrastructure now represents 45% of total IT budgets across all company sizes in 2026, according to industry data. However, this is the share of the infrastructure category, not the total IT budget. If infrastructure is 20-24% of IT, then cloud is approximately 9-11% of total IT spend. For SaaS-heavy organisations, add another 26-30% for software subscriptions. Combined cloud (IaaS + SaaS + PaaS) can represent 40-60% of total IT spend for modern cloud-first businesses.

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The calculator gives you a dollar amount for each category based on your revenue, headcount, and industry.

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Updated 2026-04-27