Guide · CFOs, controllers, and owners

How much should a company spend on IT?

Andrew Healey, founder · Updated October 13, 2026

Percentage of revenue is a starting point, not an answer. Industry changes the number more than size does. What matters more is what you're buying, what it costs per employee, and the risk you're carrying by spending too little.

The question usually comes up at budget time. The IT bill went up again, nobody can say exactly why, and someone asks what a company your size should be spending. It’s a fair question. The usual answer, a percentage of revenue, is less useful than it sounds.

What percentage of revenue can tell you

IT benchmark studies report spending as a share of revenue because every company has a revenue number. The same studies warn about using it alone.

Avasant’s Computer Economics, which has published IT spending benchmarks for decades, makes three points worth knowing:

• Industry matters far more than company size. It found the middle half of discrete manufacturers spending between 1.4% and 3.2% of revenue on IT. Banks and other financial firms spend much more. A small bank might spend over 10%.
• Averages run high. A few heavy spenders pull the average up, so use the median (the middle company) instead.
• Use more than one ratio. IT spending per employee (or per computer user) often tells you more than spending per dollar of revenue.

So the percentage tells you whether you’re far outside the normal range for your industry. It can’t tell you whether you’re spending the money well.

The numbers that matter more

What you’re actually buying. Group a year of IT spending into a few buckets: the IT company’s monthly fee, project bills, software subscriptions and licenses, hardware, internal IT staff, security tools, and phones and internet. It’s rarely laid out this way, because it’s spread across a dozen general ledger accounts.

Cost per employee. Divide the total by headcount. Track it year over year. If it rises faster than headcount, find out what changed.

Keeping the lights on versus getting better. How much of the spending keeps today’s systems running, and how much fixes or improves something? If it’s nearly all lights-on, the business isn’t getting more out of its technology each year.

The bills you’re paying for nothing. Licenses for people who left, two tools doing the same job, and services in the contract that nobody delivers. These are common and easy to fix.

The risk you’re carrying. Spending too little shows up later, as servers past the end of support, backups nobody has tested, and an insurance application you can’t honestly answer. That risk doesn’t appear in the budget until it shows up all at once.

See where it goes in one afternoon

1. Pull 12 months of general ledger detail for every account that touches technology, including the ones that hide in office expenses or telecom.
2. Sort each line into the buckets above.
3. List every subscription and contract with its renewal date and notice period.
4. Divide the total by revenue and by headcount.
5. Mark anything nobody can explain. That’s your list of questions for the IT company.

Spending too much, or too little?

You may be spending too much if bills rise faster than headcount, project charges show up most months, and nobody can tell you what the monthly fee covers.

You may be spending too little if the same problems come back, systems are past the maker’s support date, your one IT person never takes a day off, or the insurance renewal asks questions nobody can answer.

Often it’s both at once: paying for things you don’t use while underfunding the things that would protect you.

Sources: Avasant Computer Economics, IT spending as a percentage of revenue by industry, company size, and region.

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