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Optimize your IT budget for 2026
Maximize shrinking IT budgets by assessing current resources, aligning projects with business goals, optimizing costs and continually supporting staff development.
As we look toward 2026, IT leaders face the inevitable task of optimizing their ever-shrinking IT budgets. With rapidly evolving AI-based technologies, shifting workforce dynamics and increasingly demanding customers, the stakes are higher than ever before.
With budgets shrinking and expectations rising, strategic budgeting has never been more important. In this article, we'll explore some strategies for getting the most from your IT budget in the coming year.
Assess your current situation
Although it can be tempting to use the annual IT budgeting process to secure funding for new projects, you must first assess the current state of your organization's IT infrastructure. A portion of the budget will need to be allocated for maintaining your current IT resources. As an example, there might be aging PCs that need to be refreshed, or there might be upgrades or repairs that you just can't put off any longer.
As you assess the current state of your IT environment, review your hardware refresh schedule to determine how many systems are due for replacement this year and what the associated costs will be.
While you're at it, take the time to review your organization's software licenses. You might find that you need to budget for replacing an aging application with a newer version. If you use subscription-based licensing or SaaS applications, determine if any of the vendors that you use are planning licensing cost increases that will affect your budget.
It's also important to review your cloud-based resources. You might find that some cloud resources aren't performing efficiently and could benefit from additional resource allocation. Conversely, you might determine that some of your resources are underutilized -- or even redundant -- and that you can save money by canceling subscriptions or decreasing license counts.
Align IT with the organization's business goals
Once you've determined the portion of your budget that must be spent maintaining existing IT resources, you can get a feel for how much money will be available for use in future IT projects.
Before deciding which IT projects to pursue next year, it's a good idea to meet with stakeholders to gain a better understanding of the organization's needs, priorities and strategies. This will help you gain a better understanding of which proposed IT projects are most likely to align with the organization's objectives. Often, the stakeholders themselves have ideas for how IT can best drive business outcomes.
You're probably going to have to choose among several different projects, so you'll need an objective means for determining which projects get greenlit and which ones don't. This is where a priority framework comes into play.
A priority framework is designed to help evaluate IT projects based on their strategic importance, business value and anticipated ROI. Creating such a framework involves developing a list of evaluation criteria, including business value, technical feasibility, cost, risk and ROI, and then assigning weights to each of these criteria.
Consider this example framework:
- Business value: 30%.
- Technical feasibility: 20%.
- Cost: 15%.
- Risk: 15%.
- ROI: 20%.
You can then come up with a scoring system in which you award a number of points for each category. You might, for example, award 3 points for high, 2 points for medium and 1 point for low. Multiply the points by the percentages and then add all the results together to get the total project score. Higher-scoring projects should typically be prioritized over those that receive lower scores.
Optimize IT costs
One key aspect of any IT budgeting process is cost optimization -- namely, looking for opportunities for savings. Although savings can sometimes be realized through previously discussed processes, such as eliminating redundant workloads or reclaiming unused software licenses, you can take your cost optimization efforts further.
For example, changing a workload's location can sometimes make a big difference in the cost associated with hosting that workload. You might be able to reduce costs by migrating certain workloads to the cloud or rehoming other workloads and bringing them back on-premises. Similarly, you might be able to reduce workload costs by moving cloud-based workloads to a competing cloud.
As you look for ways to optimize costs, keep in mind that cost isn't the only criterion to be considered when choosing where to host a workload. It might be necessary to keep a workload in its current location if there are data residency requirements, latency issues or other requirements governing the workload's location.
Another way to reduce costs is by renegotiating vendor contracts. Even if you can't get a vendor to lower its price, you might be able to get the vendor to provide you with more value for your money. As an example, you might be able to get a vendor to give you a few software licenses, training classes, vouchers for certification exams or free support calls.
Finally, you might be able to reduce costs by exploring ways to reduce power consumption in your data center.
Don't forget about staff
Every IT budget includes funds dedicated to staff costs. Keep in mind, however, that the portion of the budget that is dedicated to staff should ideally cover more than just salaries.
It's critically important to continually invest in training for IT staff members as a way of helping them to maintain existing skills and develop new ones.
Brien Posey is a former 22-time Microsoft MVP and a commercial astronaut candidate. In his more than 30 years in IT, he has served as a lead network engineer for the U.S. Department of Defense and a network administrator for some of the largest insurance companies in America.
