Spotting Overspending in Your IT Budget: A Guide for Small Businesses in Western Canada

It’s not uncommon for small businesses to waste money on technology without realizing it. Overspending usually happens in a few predictable areas. By knowing where to look, you can reduce costs without putting your business at risk. This article expands on common areas of waste, provides real examples, and shares best practices to help you build a more efficient IT budget.

Signs you may be overspending:

• IT costs are rising faster than your revenue.
• You can’t clearly explain what each software subscription is used for.
• Staff complain about outdated hardware or lack of support despite a large IT spend.
• Your IT budget fluctuates dramatically year over year.
• Your IT budget is dominated by unplanned or surprise costs. 

Common Areas of Overspending

1. Carrying Old Contracts and Licenses
   Many businesses continue paying for unused software or licenses. For example, a business may downsize or switch platforms but keep paying for the old subscription. Industry surveys show that nearly 30% of software-as-a-service (SaaS) spend goes unused in a typical company. An annual review of all subscriptions helps identify waste and cancel tools that no longer provide value.
   Things to look for:
   • Paying for licenses that no one logs into.
   • Duplicate subscriptions across different departments.
   • Auto-renewals for services that no one has reviewed in over a year.
2. Hardware Purchased Ad-Hoc
   Buying laptops, desktops, or networking gear one at a time often costs more. Emergency purchases also mean staff may be stuck with outdated devices longer than they should. Planning a refresh cycle (every 3 to 5 years depending on use) allows you to buy in bulk, negotiate better pricing, and keep employees productive with reliable equipment.
   Things to look for:
   • Employees using devices older than 5 years.
   • High repair costs for outdated machines.
   • Frequent last-minute purchases of laptops or desktops.
3. Over-Reliance on Break-Fix IT Support
   Paying hourly for IT support creates unpredictable bills and often costs more than fixed-fee managed services. A single server issue or ransomware cleanup can easily exceed the annual cost of managed services. Fixed-fee support also encourages staff to reach out for help as soon as problems occur, which reduces downtime.
   Things to look for:
   • IT invoices that vary widely month to month.
   • Staff delaying calls to IT because of hourly charges.
   • Large one-time bills for emergency fixes.
4. Overlapping Tools
   Using multiple apps that do the same job – such as Teams, Zoom, and Slack – leads to redundant costs and user confusion. Each platform has licensing costs, support requirements, and training needs. Standardizing on one or two platforms improves efficiency and frees up budget for higher-priority needs.
   Things to look for:
   • Paying for two or more tools that serve the same purpose.
   • Employees defaulting to different platforms for the same tasks.
   • Difficulty tracking which platform holds the latest files or conversations.
5. Misaligned Internal Staffing Costs
   Relying solely on an in-house IT person can be expensive once you factor in salary, benefits, training, and turnover. For small businesses, outsourcing day-to-day support or co-managing IT with a provider can reduce costs while providing access to a deeper bench of expertise. This also makes spending more predictable.
   Things to look for:
   • One IT person covering everything without backup.
   • Rising training and certification expenses.
   • Projects delayed because the IT role is stretched too thin.

Best Practices to Control Costs

1. Carrying Old Contracts and Licenses
   Having someone knowledgeable about IT in charge of the IT budget is essential. A good managed service provider (MSP) can guide budgeting decisions and help ensure spending is aligned with business goals.
2. Conduct an Annual IT Audit
   Review subscriptions, licenses, service agreements, and hardware. Document which tools are actively used, who uses them, and what value they provide.
3. Establish a Hardware Refresh Plan
   Plan device replacements on a cycle to avoid costly emergencies. Refresh cycles can be adjusted based on role (e.g., 3 years for designers, 5 years for administrative staff).  If you’re plans include adopting the latest AI tools for your business, you’ll need to plan for the right devices.  Learn more: Future-Proofing Your Business Devices for AI Tools
4. Standardize Tools Across the Business
   Pick a primary communication, file sharing, and productivity suite. Reducing overlap lowers costs and improves collaboration.  A complex tech stack might not be necessary and cost you more than it should. 
5. Compare In-House vs. Outsourced IT Costs
   Include hidden costs like downtime, staff training, and turnover when comparing. In Western Canada, managed IT pricing is variable and based on a per user/month fee for fully managed services. This can be lower and more predictable than a single full-time hire.
6. Monitor Against Industry Benchmarks
   Most small businesses in Western Canada allocate 5–15% of their IT budget to security, with the rest split across hardware, support, and productivity tools. Review benchmarks annually to stay aligned with peers and justify spend to leadership.

Related Reading

• What Should Be in Your IT Budget? Best Practices for Small Businesses
• Signs Your Business Needs a Technology Refresh
• IT Costs for Small Businesses: In-House vs. Outsourcing in Western Canada

Get Control of Your IT Budget

Are you unsure if your business is overspending on IT? Horizon can help. Our TotalCare Managed IT services provides predictable pricing, proactive support, and expert guidance to businesses across Alberta, Saskatchewan, and Manitoba. Contact us today to learn how we can make your IT spending more efficient.