A red C-clamp tightening around a wad of paper money signifies managing tech budget constraints
Tips for Managing Tight Tech Budgets

See useful tips for managing a tight technology budget for businesses using older Enterprise technology systems, and how to conduct a cost-benefit analysis.

Can a business continuously monitor and adjust a tight tech budget by considering changes in business priorities, market conditions, and new technology developments? Identifying key priorities, leveraging cloud computing, and conducting a cost-benefit analysis are of utmost importance for any business.

This guide provides tips for managing a tight technology budget with Enterprise tech, what options exist, and how to conduct a cost-benefit analysis. Let’s get started. 

What are tech budget constraints?

A budget constraint is an economic term that combines the dollar amount of what you can afford with the amount of income you can spend. The cost of each item and the minimum quantity required determine how much of a budget can be spent.

Enterprise technology budget management involves determining what projects to fund fully or partially and how to balance the tech budget. Most business budgets are not a free-for-all for spending. Almost any technology business experiences the need to manage budget constraints.

To calculate an accurate budget constraint, use the following equation: 

  • (P1 x Q1) + (P2 x Q2) = m

“P1” is the cost of one item and “P2” is the cost of a second item. “Q1” and “Q2” are the quantity of each item needed and “m” is the amount of money required. Purchasing new technology with a tight budget requires analyzing what portion of each need can be acquired as well as determining if it’s possible to purchase the entire option before it expires or becomes obsolete.

Delivering new tech while managing current systems is essential, but funding for improvements in technology is tough, especially when legacy or older ERP systems are involved. Digital transformation is expensive and complex and is required in sets to be implemented together to realize the upgrade benefit. 

Another problem for technology budgeting is managing it as a continual, iterative journey that involves multiple projects and players with separate funding. Technology improvements are best budgeted using a portfolio analysis and funding approach.

If your business has a tight tech budget, consider using the portfolio approach to generate funding that’s geared toward improving business performance while reducing costs. The portfolio approach focuses more on the ROI (return on investment) over time. The offset in cost may help loosen budget constraints.

How does a tech budget impact an Enterprise system’s function?

On average, businesses spend 60-80% of tech budgets keeping old Enterprise systems updated and running instead of investing in new technology that provides more optimized business processes and advantages. However, budget constraints are real, and new business technology systems and Enterprise upgrades or integrations are expensive.

Tight tech budgets impact the ability to upgrade and integrate Enterprise systems with newer technology. Without a sufficient budget, it’s not easy to get all the necessary updates to manage legacy software over an extended period, yet only 38% of IT professionals indicate their budgets have increased since 2020.

If your budget is tight, consider purchasing new technology and keeping it separate from the ERP. Or, consider modernizing your ERP in sections. For example, Salesforce offers multiple options for integrating into the modern Salesforce system with an ERP. Before starting down the modernization path, read on to find out how to conduct a cost-benefit analysis.

How to conduct a cost-benefit analysis

A cost-benefit analysis compares estimated or projected costs and benefits associated with a business decision. A business decision may be good when the benefits outweigh the costs. If the costs are higher than the expected benefit, the business decision may need further consideration before it’s implemented. After all, there’s no sense in spending money when the benefit is low or the disruption to the business causes more harm than good.

Conducting a cost-benefit analysis helps the business use data analysis as an accurate prediction of the value chain and ROI for any business project. Using data-driven decision-making helps to ensure business decisions are grounded and beneficial for the business.

Cost-benefit analysis steps include:

  • Create an analysis framework
    • Identify the goal or objective the decision addresses
    • Determine how to measure decision success
    • Determine the metric used to compare cost and benefit
  • Determine a cost 
    • Include direct costs and expenses
    • Include indirect, intangible, and opportunity costs
  • Develop a benefit list
    • Repeat the above:
      • Direct 
      • Indirect
      • Intangible
      • Competitive
  • Assign dollar values to each cost and benefit
    • Set monetary units to each cost and benefit
  • Calculate the total values for costs and benefits
    • Compare the results
    • Ensure the analysis meets the goal or objective 

A cost-benefit analysis provides an unbiased evaluation of a potential business decision to judge its value. It’s an excellent method of leveraging data-driven logic to improve business outcomes. A cost-benefit analysis often uncovers both hidden costs and benefits that can be analyzed for their overall impact.

Are you ready to make the most of a tight tech budget?

Need help designing and implementing a scalable and efficient Enterprise system for increased productivity and a future-proof enterprise system? Designing a highly functional, efficient Enterprise system is difficult and time-consuming. Business success depends on finding a trustworthy outsourcing IT and software development partner that values honest, open communication, clear contract terms, and full transparency and flexibility and can work with you, side-by-side to create the Enterprise system that meets your needs and budget

At Allari, we provide the extra expertise you need to adapt and thrive in changing times. We’ll tweak your tech and transform your company – for the better!

Our 60+ specialists are experts in J.D. Edwards and 80 other business technologies, and they know them inside and out. Our specialists’ knowledge and experience position Allari to help with your business needs from day-to-day production issues to full-scale digital transformation projects.

Get in touch! Schedule a free consultation to discuss the IT problems you need to solve or the digital projects you want to accomplish and get started.