Six Questions SMBs Should Ask When Planning IT Costs in 2024

Imagine diligently managing your IT budget for the year ahead only to be blindsided by unexpected costs. It could be something as small as an extra software license request or as large as an urgent cybersecurity upgrade. As every small or medium business (SMB) knows, every dollar must be spent strategically to maximize growth and profitability. But as your company digitizes more of its daily operations, your IT budget could seemingly have a mind of its own.

This is a familiar frustration for many SMBs. As you move key workloads like email, data storage, and application hosting to the cloud, you gain efficiency and scalability. But extra costs can add up. Without proactive management, your cloud bill can quickly skyrocket. IDC predicts that a quarter of SMBs will account for more than 50 percent of SMB technology spend by 2025 as technology intensity, spending capacity, and digital business models become more important.

So how do savvy SMBs rein in cloud costs? The key is approaching your tech stack like any other business investment—no computer science degree required. You must have clear visibility into consumption and tie that back to business value. With the right IT cost management solution, you can forecast, optimize, and align spending to outcomes. This enables you to run lean, maximize resources, and focus budgets on your customers.

As SMBs move engage in a digital business model, it becomes increasingly important for non-technical stakeholders to dive deep into their technology stack during business planning and cost forecasting. In this blog post, we will share some key questions non-technical stakeholders can ask their teams during business planning discussions for 2024.

1. “What business drivers will influence IT budget allocation?”

Events and initiatives such as a product release, a marketing event leading to higher traffic, or user interaction surges from holiday sales will all influence how much cloud computing power is needed. The underlying cloud setup must be reliable, secure, and available during these business initiatives. Your SMB’s business KPIs should also directly influence cloud IT planning. Ask teams what the measures of success are and connect them to IT solutions rather than simply spending the same as the past year. Some examples:

• A medical clinic may need upgraded cloud services to improve digital patient onboarding.
• An e-commerce website may need more computing resources to keep the site live and increase revenue based on global sales trends.
• An automotive manufacturer may require cloud resources for automation and analytics.

2. “What are our strategies to upskill/reskill our teams to adopt a cloud-first mindset?”

Any employee—technical or non-technical—can benefit from knowing how to make use of software, data, and more in the cloud. For any team that uses cloud resources, training and certification is important to consider during cost planning discussions. There are multiple ways to overcome the challenge of refining cloud expertise. Some of our Amazon Web Services customers dedicate time and funds for internal training efforts and others onboard a third-party partner to assist with development. Learn more about why and how SMBs invest in IT training to accelerate growth.

3. “What are our company expansion plans?”

As SMBs look to grow regionally (or globally), there are several IT budget implications. Invest in tools and infrastructure such as virtual private networks (VPNs), videoconferencing, and cloud-based collaboration solutions that cater to a distributed workforce. Compliance with data regulations like GDPR also becomes crucial when operating internationally. As part of this process, companies need to understand the privacy laws in new countries as well as provide for any changes that have to be made by budgeting. Additionally, there will be need for investments in data storage, business intelligence, and data science tools if there are plans to carry out data analytics through regional or global operations.

4. “What is our disaster recovery strategy?”

A key part of managing IT costs is confirming your organization has a solid disaster recovery plan. This plan should outline steps for restoring operations in the event of a natural disaster or a security issue. Thinking about how long recovery takes and what data nee­ds it is critical whe­n making these plans. Conducting a gap analysis will help identify areas where investment is needed to meet your recovery goals. A well-planned disaster recovery strategy can minimize downtime and ensure business continuity, ultimately saving your organization time and money.

5. “Do we have any new compliance and regulatory requirements?”

Companies handling sensitive customer records may have to follow regulations such as that HIPAA or PCI DSS demand, which require security checks and auditing once a year. SMBs in highly-regulated sectors like finance or healthcare should look out for the costs of compliance tools, audits, and dedicated staff time.

Services such as AWS Artifact offer access to instantaneously available compliance reports and AWS Security Hub consolidates regulatory monitoring and automation. Small businesses also have room to allocate some budget toward third-party solutions that help them with cloud compliance management. While meeting standards adds IT costs, non-compliance can result in huge fines, lawsuits or loss of reputation. SMBs need to be aware of these requirements while planning for the year ahead.

6. “How do we prioritize IT license renewals and engagements with third-party vendors?”

When planning your IT budget, take time to thoroughly evaluate your current technology landscape and upcoming needs. If each team is responsible for their own IT solutions, ask them to map out how many existing software licenses, subscriptions, maintenance agreements, and vendor contracts will need to be renewed. Pay close attention to potential new software or upgrades that may be required to support business growth or replace outdated systems. Check hardware lifecycles and start preparing for any refreshes that may be necessary. Developing a comprehensive inventory of these renewal, replacement, and new project expenses will help you plan for IT requirements over the next 12-24 months. Approaching your forecast this way will help you align spending to actual IT infrastructure requirements versus guessing based on previous year budgets.

The cloud allows you to trade fixed expenses—such as on-premises data centers and physical servers—for variable expenses, and you only pay for IT as you consume it. Effective cost management is crucial when using AWS to avoid unexpected expenses and optimize your cloud spending. Here are some best practices for AWS cost management whether you handle IT in-house or have a managed services provider:

• Regularly use AWS Cost Explorer to gain insights into your AWS spending. This tool helps you visualize, analyze, and understand your historical and current costs.
• Create AWS Budgets to set spending thresholds for different services or projects. It can notify you when you approach or exceed your limits.
• Implement a tagging strategy to label your AWS resources by department, project, or environment. This makes it easier to allocate costs and track expenses accurately.
• Identify, terminate, or scale down underutilized resources. AWS provides services like AWS Trusted Advisor to help identify such resources.
• Enable detailed AWS Cost and Usage Reports to get granular insights into your AWS spending. You can use these reports to track costs more effectively.

By following these best practices, you can manage your AWS costs, prevent budget overruns, and make informed decisions to optimize your cloud spending in 2024.

Next steps

We covered the key conversations and tools to help connect the dots between business and technical planning as well as manage IT costs as one big picture. There are three ways you can take action on the items above. If you’re an existing customer with an AWS account team, reach out to them via email. If you’re new to AWS or do not have an account team, you can either ask an expert or find AWS Partner Network consultants who can help your SMB achieve its goals. Learn more about what we offer SMBs on AWS Smart Business.