Looking at Technology Spend as a Cost per Employee

What does tech really cost?

How Much Should Businesses Really Spend on IT Per Employee?

When you run a business, the numbers matter, especially when it comes to technology. After launching my poll about technology spend per employee, I dug into what benchmarks say, and it turns out there's no one-size-fits-all answer. But there are some useful guideposts to help you see whether your tech investment is in line with your growth, risk, and business goals.

What Benchmarks Tell Us

• IT Spend Per Employee: According to IBM/Apptio’s bench-marking definitions, this metric captures total IT investment (capital + operational) divided by headcount. It includes everything that supports employee workflows — software, support, managed service providers, hosting, etc. IBM

• IT Spend Relative to Revenue & Operating Expense: IBM also uses metrics like “IT Spend as a Percent of Revenue” or “IT Spend as a Percent of Operating Expense” to provide context. High per-employee costs might be okay if you’re in a high-margin business or doing innovation and automation. In low-margin operations, those same costs can kill profitability. IBM

What To Watch Out For

When comparing your per-employee technology spend benchmark, keep these variables in mind, they tend to shift what’s “normal”:

• Industry: Tech, financial services, or data-intensive businesses often spend more per employee than, say, retail or manufacturing.

• Scale & Headcount: Younger or smaller companies tend to have higher costs per employee because fixed costs (licensing, vendor contracts, infrastructure) are spread across fewer people.

• Vendor vs In-House vs Outsourced: Companies leaning heavily on external MSPs or managed services often see higher per-employee vendor spend. Meanwhile, those who build or integrate more internally can sometimes reduce vendor costs but face other trade-offs.

• Security & Compliance Needs: Regulations, customer data protection, cybersecurity risk, these push costs higher. Companies with stringent compliance or high security risk need to budget more here.

What I’m Seeing

Based on research and experience working with businesses over the years:

• Many SMBs guess their spend is lower than actual, especially when including hosting, security, backup, disaster recovery, licensing, and vendor fees.

• Companies that do periodic reviews of their MSP/vendor contracts tend to uncover inefficiencies and often save 15-30% annually (or get better performance for the same spend).

• There’s often little transparency around security cost or hidden fees — sometimes what seems cheap upfront ends up costing more when things go wrong or when scaling is needed.

Guidelines You Can Use Now

Here are some rough “target ranges” to use internally, depending on business size, complexity, and risk posture. These are not one-true-values, but starting points for what you might expect or aim for:

Business Size / Complexity	Low Benchmark <$ /employee/mo	Mid-Range Target	High (Expected for high security / heavy vendor use)
Small (~10-50)	~$100-$200	~$200-$400	$400-$700+
Mid-size (~50-200)	$150-$300	$300-$500	$500-$800+
Larger / Regulated / Data-Heavy	$200-$400	$500-$800	$800-$1,200+ or more

Bottom Line

• If your technology spend per employee feels high, don’t panic — context matters greatly.

• The real value is in knowing your numbers, comparing to benchmarks, and then continuously optimizing.

• Regular audits of contracts, vendor performance, and infrastructure utilization can uncover hidden value.

Question for you: after seeing this, did your sense of your own IT spend change? What surprised you the most: licensing, security, vendor fees, downtime?

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