Published July 6, 2023 | Updated February 20, 2024
IT budgets are under pressure. For months now, interest rates have remained high to slow demand to combat inflation. Accordingly, many corporate and government IT spending budgets are rapidly being cut as new revenue pressures arise. But unlike past economic slowdowns, new forces are at play where near-term IT spending reduction could lead to far greater damaging operating expenses in the long term. The best example of this is today’s IT security infrastructure.
The Growth of IT Security Solutions
Digital and online transactions, already increasing annually at double-digit percentage rates by 2019, have exploded since the pandemic. Cyberattacks have increased accordingly with accelerating complexity. At the current rate of growth, damage from cyberattacks will amount to about $10.5 trillion annually by 2025 – a 300% increase from 2015 levels.* Though spending has grown rapidly to increase IT security infrastructure, a recent survey from McKinsey indicates that a $2 trillion gap of additional spending may be required to address the growing concern. Economic decline forcing reduced IT spending would only increase this gap and leave larger risks of greater financial damage to come.
Actions and Ideas to Consider
So, how do you handle the pressure to cut what can’t be cut? Here are four key best practices and ideas to consider:
- Interdepartmental Communication. Effectively solving the need (and the increasing need) for capital to fund IT security needs involves establishing a deeper working relationship between the finance and technology functions of your organization. Why is finance seeking budget cuts? Do they understand the potential risk (financial and otherwise) of an attack not defended? Does IT understand the financial goals being adhered to and possible ways to achieve those without eliminating new investments or projects? You might be surprised how rarely these functional areas really engage in collaborative discussions on issues like these. Or maybe not.
- Balancing Ownership vs. Use Mindsets. Paying cash for new technology and owning it outright is easy to do when revenues are strong, cash positions are plentiful, and interest rates are near zero. But as all those elements are pushed into less favorable territory, ownership makes less sense and drives the financial decision maker to call for cuts. But making that decision without evaluating financial structures that allow for a more pay-for-use or as-a-service solutions that require less cash, administrative burdens of ownership, or offer easier upgrade cycles and even more favorable balance sheet treatments, might lead to unnecessary cuts.
- Buy the Bundle. In recent months, many technology sellers have been bundling hardware, software, and services for various security solutions. Bundling drives a certain economy of scale and reduces prices. Additionally, by integrating a financing solution built around a reasonable upgrade cycle, companies can acquire the mission-critical security technologies needed while preserving cash and cash flow essential to success in a decelerating economic cycle.
- Engage Specialists. Making accelerated technology investments affordable in a softening economy is a conversation no IT leader looks forward to. But engaging specialty technology finance companies can help. These firms have a demonstrated track record both through the technology sellers and direct channels of helping customers come up with a financial approach to stay on the cutting edge of technology while minimizing the yearly cash burden to volatile budgets. They can design solutions around how you use the technology you might not have previously been exposed to and can help IT leaders build a financial business case strong enough to survive looming budget cuts.
IT Security Is Necessary, But Financial Creativity Is Required
In winning the IT budget battle, a little innovation and collaboration create win/win scenarios. And LEAF can help. For over 20 years and in all economic cycles, LEAF has worked with technology sellers and organizations directly to ensure they can stay on the cutting edge of technology affordably.
*2022 Cybersecurity Almanac