IT Spending Benchmarks for 2025 and Beyond

2025 spending is a huge question mark for many industries.? Some budgets are tightening; some are expanding.? Where do IT dollars fit into this equation?

The research we’re using today comes from Gartner’s “IT Key Metrics Data 2025: Industry Measures —Insights for Midsize Enterprises” (Gartner defines Midsize as companies with revenues falling in the annual range of $50M - $1B).? This data was published in December 2024.?

The graph below shows the average IT Spending as a Percentage of Revenue for all midsized enterprises at 3.1%, and the larger range of industry-specific spending.? This research can serve as a guideline when you’re working on next year’s budget, or proposal for a new initiative.? (Note that simply because an industry spends more or less on average than another, we don’t conclude whether they are spending wisely or poorly.)?

If you compare this chart to 2022 numbers, many industries are spending flat or even a smaller percentage on IT. However, one interesting area is in the Education sector, which is showing a significant increase.? Several reasons for this expansion in spending can be attributed to:

• The ‘battle’ for increasing student enrollment as traditional student populations cap out
• Heavy focus on stopping an increase in cyberattacks in the higher ed environment since 2023
• Supporting the increasing demand for digital infrastructure to attract hybrid and remote students
• Supporting the use of Virtual Reality [VR] and Augmented Reality [AR] technologies for instruction and delivery

Another lens to understand and gauge spending for government and nonprofit organizations (such as public higher ed and K12 education) is to look at IT Spending as a Percentage of Operating Expense, seen below.? If you are in the Education sector, and for example your operating budget is around $25 million, you could estimate IT spending to land around $1.5-1.6 million annually on average.? This number would include personnel salaries, digital spending, and software licensing.

The number for national and international governmental agencies (13%) really stands out on this graph.? Federal agencies have existed as a target for cyber criminals for some time now, and security spending will continue to be important.? These organizations also have pressure to modernize systems as technical debt (the financial cost of supporting older technology) compounds year after year when failing to upgrade older yet critical infrastructure.? Labor and time spent supporting aging and inefficient systems can grow rapidly if unaddressed.

The below graph allows us to look a little deeper to see where the spending takes place inside the IT budget.? It highlights numbers around running, growing, and transforming an organization; these figures hold consistent to metrics over the past few years.? On average, we’re spending 3/4 of our budget on Run (keeping the lights on), 1/6 on Grow (expanding on what you’ve already built), and 1/12 on Transform (initiatives that revolutionize the way you conduct business operations).? A good way to think about growth would be updating software tools to more-intelligently gather data from your sources.? A transformative process would be developing a way to make enterprise-wide data-driven decisions with business intelligence (BI) tools using that same information.

In times of uncertainty, how do you know when it’s time to grow?? The recent political climate, along with the advent and rise of artificial intelligence (AI), tells us that now is the time to invest in a data strategy.? Great reporting used to be a ‘nice-to-have’ but is now a necessity.? If you operate in the nonprofit sector, you want to be able to measure the impact of EVERY DOLLAR gifted to your organization.? Failure to showcase how efficient your organization fulfills its mission may cost you additional funding down the road.? You need the ability to report explicitly on the effect you have in your areas of service and your community.? Starting this process of getting your ‘data house’ in order can be a daunting yet transformative task – see this article for a roadmap on how to navigate that entire process.?

An interesting metric inside the IT budget is end-user services spending, below.? This is a measurement of how much of your IT budget is spent maintaining and improving services for your employees and supporting issues that arise.? Looking at Education again, we see a lot of digital spending – which is in line with those higher ed initiatives we listed above.? Improving the digital experience of your students is a critical initiative. ?Are your students logging into 8 different apps in order to download class information, turn in homework, find research materials, check grades, and submit a project for another class?? This becomes exhausting for the end-user.? Institutions who get in front of this pain-point, and make life easier for the everyday scholar, will reap the benefits of student retention.? Can you simplify this process for your instructors as well?? Is your technology stack from their standpoint confusing as heck?? (As a technology leader, do you sit with your consumers and learn the processes from their point of view?? I highly recommend it.)

The chart below is a quick deep dive into IT security spending.? These numbers can vary wildly due to factors such as work-from-home (WFH) arrangements, where a company would spend less on hardware infrastructure (firewalls) and more on software (like anti-virus and monitoring solutions).? Per the graph, spending a quarter or a third of your IT security budget on expertise outside of your own teams seems to be a strong approach to keeping your organization secure.? Don’t hesitate to add those layers of security on top of your own, or to seek out partners who make it their job keeping others safe.? (In some cases, it may be cheaper to outsource the entirety of your security services.)

Does profitability correlate with the amount spent on IT resources?? At first glance, comparing the chart below with the 'IT Spending as a % of Revenue' graph doesn’t seem to draw that conclusion.? However, the 'Run, Grow, and Transform' graph has some clues for us.? The top six profitable industries below each show us a combined total of 25% or more of IT spending in the Grow and Transform categories.? Companies focused on their strategic next steps, whether it’s better customer service or more efficient automation, show success.? Researching and implementing new solutions equates to more profitable outcomes.? According to McKinsey, banking institutions with greater automation and digitization of customer technology, document management, and back-office tasks see almost double the profit margins than those who lag behind.

Here are my overall IT Spending takeaways for 2025 and beyond:

• If you aren’t spending ~15% of your IT budget on growing your operations, you will most likely be passed up by competitors in a few years, and you are almost certainly missing out on increasing profit margins.
• Along with the point above, you should be spending ~10% of your budget on transformative ideas such as building your data warehouse to leverage AI and BI tools to assist decision making in the future.
• If you are in a sector which does not spend as heavily on IT initiatives (such as Construction and Energy), find a niche where you can excel and spend with intent.? That is how you continue to grow and compete with the juggernauts in your space.
• If you are in the Education sector, pay attention to the competition for headcount as the number of potential students born each year has capped.
• If your organization is a Nonprofit and you’re operating with a fixed spending number, pay attention to the recent scrutiny around receiving federal funds.? You will be asked more and more to prove these received dollars are creating results and impact.? You will want to start your data management strategy - which leads to strong reporting alongside BI and AI advantages – today.? The more you harness the power of technology and garner those insights, the better your organization will be with data driven decision making and clarity in reporting.
• And finally, if you’re an IT decision maker, keep your eye on your organization’s strategic plan spending towards Growth and Transformation, and benefit knowing you are orchestrating positive change across the board.