Understanding IT Costs
- Direct costs: Hardware, software, cloud services, support contracts
- Labour costs: IT staff, consultant time, training
- Hidden costs: Downtime, productivity loss, security incidents
- Opportunity costs: What you can't do due to IT limitations
Measuring IT Value
Cost Savings
Compare costs before and after: reduced manual work, eliminated redundant systems, lower support costs, improved efficiency.
Revenue Impact
Technology that enables new capabilities, faster delivery, better customer experience, or market expansion.
Risk Reduction
Security investments prevent breaches. Business continuity prevents extended outages. Compliance avoids penalties.
Calculating ROI
Basic ROI formula: (Gain from Investment - Cost of Investment) / Cost of Investment × 100
- Identify all costs over the evaluation period (3-5 years)
- Quantify benefits: cost savings, productivity gains, revenue impact
- Factor in risk: probability-weighted cost of avoided incidents
- Consider time value of money for larger investments
How We Researched This Article
This article was compiled using information from authoritative industry sources to ensure accuracy and relevance for Australian businesses.
Sources & References
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Gartner IT Financial Management
Industry research on IT investment and value measurement
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Forrester Total Economic Impact
Framework for evaluating technology investments
* Information is current as of the publication date. Cybersecurity guidelines and best practices evolve regularly. We recommend verifying current recommendations with the original sources.
Frequently Asked Questions
How do we justify security spending with no direct revenue?
Frame security as risk reduction. Calculate potential breach costs (average Australian breach: $4.03 million). Security spending is insurance—the ROI is avoiding catastrophic losses.
What's a reasonable IT budget for an SMB?
Industry benchmarks suggest 3-6% of revenue for most businesses, higher for technology-dependent industries. However, percentage alone isn't meaningful—focus on whether spending supports business objectives.
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