"Our IT costs seem high, but I'm not sure what we're actually paying for."
We hear this frequently from business owners and decision-makers. Technology expenses can feel like a black box. Money goes in, systems (hopefully) work, but it's often unclear where exactly those dollars are going or whether you're getting good value.
After 30+ years managing technology for businesses across transportation, entertainment, healthcare, steel service centers, and other industries, we've learned that understanding your technology costs is the first step toward controlling them. Not cutting corners, but controlling them intelligently.
Let's break down where your technology budget actually goes, what's reasonable to expect, and how to know if you're getting good value for your investment.
The Big Picture: What Should IT Cost?
First, the question everyone asks: "What should we be spending on IT?"
The frustrating answer: It depends.
The more helpful answer: Most small to mid-sized businesses spend between 3% and 10% of revenue on technology, depending on several factors:
Lower end (3-5%):
- Less technology-dependent industries
- Mature, stable technology environments
- Few compliance requirements
- Primarily office work with standard needs
Higher end (7-10%+):
- Technology-intensive operations (dispatch systems, automated facilities, etc.)
- Heavy compliance requirements (healthcare, finance)
- Rapid growth requiring frequent technology changes
- Highly specialized or custom systems
What We Typically See by Industry
Professional Services
4-6%
Healthcare Practices
6-8%
Transportation
5-7%
Entertainment Centers
6-9%
Manufacturing/Metals
4-7%
Retail
3-5%
But percentages alone don't tell the full story. Let's look at what makes up that total cost.
The Seven Categories of Technology Costs
1 Infrastructure: The Foundation 20-30% of IT budget
This is the physical and virtual hardware that everything else runs on.
What's included:
- Servers: Physical or virtual machines that host your applications and data
- Network equipment: Routers, switches, firewalls, WiFi access points
- Workstations: Desktop computers and laptops for employees
- Mobile devices: Tablets, smartphones (especially important for dispatch, field work)
- Peripherals: Printers, scanners, barcode readers, label printers
- Specialized equipment: Scales, timing systems, GPS devices, POS terminals
Typical costs:
Server (virtual)
$100-300/month
Network equipment
$2,000-10,000 setup
Workstation
$800-1,500 each
Enterprise WiFi
$3,000-8,000 setup
🚩 Red flags:
- Hardware more than 5-7 years old (expensive to maintain, security risks)
- Frequent emergency replacements (sign of deferred maintenance)
- Patched-together systems from multiple eras
- Infrastructure that can't support current needs
✓ Smart approach:
- Plan replacements proactively (budget annually for lifecycle)
- Consider cloud alternatives to reduce upfront hardware costs
- Right-size infrastructure (don't over-buy or under-buy)
- Document what you have and when it needs replacement
2 Software and Licensing 25-35% of IT budget
The applications and systems your business runs on.
Operating systems and productivity:
- Microsoft 365 (email, Office apps, OneDrive): $12-35/user/month
- Windows licenses: Typically included in PC purchase or $100-200 per device
- Collaboration tools (Teams, Slack, Zoom): $0-25/user/month
Industry-specific software:
- Dispatch systems (iCabbi, TaxiCharger, Tracker Management): Varies widely
- Practice management (Maxident, Shepherd, Carestream): $100-500/month per provider
- Entertainment systems (Apex Timing, Intercard, Brunswick): License + transaction fees
- Steel/metals (Enmark Eniteo, ProNest, Sigmanest): Often significant annual costs
Typical scenario for 10-person business:
Microsoft 365
$250/month
Industry software
$500-2,000/month
Business apps
$300-500/month
Security software
$100-200/month
Total
$1,150-2,950/month
🚩 Red flags:
- Paying for software nobody uses
- Outdated software no longer supported (security risk)
- Subscription creep (signing up for tools then forgetting about them)
- Shadow IT (employees buying their own software without approval)
✓ Smart approach:
- Annual license audit (what are we paying for, who's using it?)
- Negotiate multi-year agreements for core systems
- Consider bundled solutions vs. point products
- Plan for software costs when evaluating new systems
3 Support and Maintenance 20-30% of IT budget
The cost of keeping everything running and helping users.
Managed IT services:
- All-inclusive plans: $100-250/user/month (typical for comprehensive coverage)
- Basic monitoring: $50-100/user/month
- Break-fix only: $125-200/hour (seems cheaper but often costs more)
What's reasonable for a 10-person business:
Managed services approach
$1,500-2,500/month
Internal IT person
$5,000-8,000/month
Break-fix approach
$2,000-6,000/month (averaged)
🚩 Red flags:
- Constantly calling for the same issues (underlying problems not being fixed)
- No proactive maintenance, only emergency responses
- Unclear what's covered vs. what costs extra
- Support provider unfamiliar with your industry or systems
✓ Smart approach:
- Calculate total cost of current approach (include hidden costs)
- Compare managed services vs. internal vs. hybrid
- Ensure provider has expertise in your specific systems
- Look for proactive maintenance, not just reactive fixes
4 Security and Compliance 15-20% of IT budget
Protection from threats and meeting regulatory requirements.
Basic security:
- Antivirus/anti-malware: $5-15/device/month
- Firewall: $500-2,000 annually for small business
- Email security: $3-8/user/month
- Password management: $3-8/user/month
Advanced security:
- EDR (Endpoint Detection & Response): $8-15/device/month
- SIEM (Security monitoring): $500-2,000/month for small business
- Penetration testing: $3,000-10,000 annually
- Cyber insurance: $1,000-5,000/year
🚩 Red flags:
- "We haven't needed security before" attitude
- No backup testing (backups that don't work)
- Unclear who's responsible for compliance
- Security as an afterthought, not built-in
✓ Smart approach:
- Security is not optional. Budget for it appropriately
- Layer defenses (don't rely on single solution)
- Test backups regularly
- Train employees (they're your first line of defense)
- Consider cyber insurance
5 Internet and Communications 10-15% of IT budget
Connectivity and communication services.
Typical costs for 10-person business:
Primary internet
$200/month
Backup internet
$100/month
Phone system (VoIP)
$350/month
Mobile devices (10 lines)
$600/month
Total
$1,250/month
🚩 Red flags:
- Single internet connection with no backup (major risk)
- Paying for more bandwidth than you need
- Old phone contracts you can't escape
6 Projects and Improvements 10-20% of IT budget
One-time or periodic investments in improvements.
Common project costs:
- Office network buildout: $5,000-20,000
- Server upgrades or migration: $10,000-50,000
- New system deployment: $5,000-50,000+ depending on complexity
- Data migration: $2,000-20,000
- Security improvements: $3,000-15,000
✓ Smart approach:
- Budget annually for projects
- Prioritize based on business impact
- Get multiple quotes for major work
- Define success criteria before starting
- Plan for training and adoption, not just installation
7 Hidden and Forgotten Costs 5-10% of IT budget
The expenses that don't fit neatly into categories but add up.
What's often missed:
- Productivity losses: $100-300/hour per affected employee during downtime
- Slow systems: 30-60 minutes per employee per week in lost productivity
- Forgotten subscriptions: That software trial that became a paid subscription
- Technical debt: Patches and workarounds that eventually require proper fixes
- Emergency support: $200-400/hour for after-hours issues
Example of hidden costs:
A 15-person business with "adequate" technology:
- Lost productivity from slow systems: $25,000/year
- Forgotten software subscriptions: $3,000/year
- Monthly downtime incidents: $6,000/year
- Technical debt fixes: $4,000/year
Total hidden costs: $38,000/year (equivalent to $211/month per employee)
That's potentially more than they're spending on visible IT costs!
Common Cost Reduction Mistakes
When budgets get tight, here are cost-cutting approaches that often backfire:
1. Switching to break-fix support
Seems cheaper (only pay when you need it)
Reality: Costs more and systems deteriorate. Proactive maintenance costs less than constant emergencies.
2. Extending hardware lifecycles too long
"We'll use this computer another 2 years"
Reality: Old equipment costs more to support, reduces productivity, increases security risks. Better to budget for regular replacement cycles.
3. Skimping on security
"We're too small to be targeted"
Reality: Small businesses are frequent targets. One incident can cost more than years of proper security.
4. Eliminating redundancy
"We'll risk it with one internet connection"
Reality: When it fails, entire business stops. Redundancy is insurance, not waste.
5. DIY approach to save money
"YouTube can teach us anything"
Reality: Time spent + mistakes cost more than professionals. Know when to outsource vs. handle internally.
Questions to Ask About Your IT Costs
Visibility questions:
- Do I have a complete inventory of what we're paying for?
- Can I explain what each major expense provides?
- Do I know what's included vs. what costs extra?
Value questions:
- What would it cost if our systems were down for a day?
- How much time do employees lose to technology problems?
- Are we positioned to scale as the business grows?
Comparison questions:
- How do our costs compare to similar businesses?
- Are we paying for capabilities we don't use?
- Are there gaps where we should be spending more?
Strategic questions:
- Does our technology support our business goals?
- What should we be investing in next?
- Are we getting better over time or just maintaining status quo?
Industry-Specific Cost Considerations
🚕 Transportation (Taxi/Towing)
- Dispatch system costs often higher than typical business software
- 24/7 operations may require premium support
- Mobile devices and GPS significant ongoing costs
Consider: iCabbi, TaxiCharger, Tracker Management licensing and support
🎳 Family Entertainment Centers
- Timing and POS systems can be expensive
- Payment processing infrastructure costs
- Multi-location complexity
Consider: Apex Timing, Intercard, Brunswick systems, Touch Bistro
🏥 Healthcare (Medical/Dental/Veterinary)
- Practice management software significant cost
- HIPAA compliance adds security costs
- Imaging and specialized equipment
Consider: Maxident, Shepherd, Carestream, Safecom licensing
🏭 Steel Service Centers
- Specialized nesting and inventory software costly
- Integration with equipment important
- Large file handling (CAD drawings)
Consider: Enmark Eniteo, ProNest, Sigmanest
♻️ Metals Recycling
- Scale integration costs
- Compliance and reporting requirements
- Rugged environment increases hardware costs
Consider: Western Scale, Rematter, ScrapIT
🖥️ IBM i / AS400 Environments
- Specialized expertise commands premium pricing
- RPG programming for customizations
- Modernization and integration projects
Consider: Finding providers with actual IBM i experience
Building Your IT Budget
Here's a practical approach to budgeting technology costs:
1
Month 1
Inventory current costs
- List everything you're paying for
- Include hardware, software, services, support
- Don't forget hidden costs (employee time, downtime)
2
Month 1
Categorize and analyze
- Sort costs into the seven categories
- Identify what's essential vs. optional
- Look for redundancy or waste
3
Month 2
Benchmark
- Compare to industry standards
- Talk to peers in similar businesses
- Get assessment from trusted IT provider
4
Month 2
Identify gaps and opportunities
- Where are we underinvesting?
- Where are we overspending?
- What's preventing business growth?
5
Month 3
Build strategic budget
- Maintain essential services
- Address critical gaps
- Plan for known projects
- Reserve 10-15% for unexpected needs
6
Ongoing
Review quarterly
- Adjust based on business changes
- Eliminate what's not working
- Invest in what's driving value
The Bottom Line
Understanding your technology costs isn't about finding the cheapest solution. It's about making informed decisions that support your business goals.
Key Takeaways
- Technology should cost 3-10% of revenue depending on your industry and needs
- Costs fall into seven categories: Infrastructure, software, support, security, communications, projects, and hidden costs
- Total cost of ownership includes hidden productivity losses and downtime
- Value matters more than price: Cheap solutions often cost more in the long run
- Industry-specific systems (like iCabbi, Maxident, Enmark Eniteo) require specialized expertise
- Proactive approach costs less than reactive firefighting
- Regular review of costs prevents waste and identifies opportunities
The goal: Technology that enables your business to operate efficiently, grow successfully, and compete effectively, at a cost that makes sense for your size and industry.
Get a Clear Picture of Your IT Costs
How Treo Solutions Can Help
At Treo Solutions, we believe in transparency. We can help you:
- Audit current IT spending: Understand exactly where your money goes
- Benchmark against industry standards: Know if you're spending appropriately
- Identify optimization opportunities: Find waste and gaps
- Plan strategic investments: Align technology with business goals
- Provide clear, predictable pricing: No surprises, no hidden costs
Our approach:
- Free technology assessment and cost review
- Industry-specific expertise (transportation, entertainment, healthcare, steel/metals, and more)
- Specialized knowledge (IBM i/AS400, iCabbi, Maxident, Enmark Eniteo, Apex Timing, and other industry platforms)
- Over 30 years helping businesses optimize technology investments
Let's Talk About Your Technology Costs
Whether you're evaluating your current spending, planning for growth, or just want to understand if you're getting good value, we're happy to help.
We'll help you understand where your money is going and whether it's working as hard as you are.