An IT budget-to-revenue ratio is a critical starting point in the budgeting process. Although many IT managers are quick to point out its limitations, it helps an organization understand its current IT spending context.

The Old Standby

CEOs expect IT to rationalize its spending against broad industry averages. What is surprising is how many IT decision makers believe that a percentage-of-revenue measure does not make business sense. They argue that unless the ratio is understood in the context of how an individual company does business within its industry, the average is meaningless. While there is some validity to this argument, developing a budget without an industry benchmark eliminates an important frame of reference.

Info-Tech's IT Budget-to-Revenue Ratio Findings

The chart below summarizes, by industry, the average IT budget as a percentage of revenue in the SME market.

To put these...