Planning 2024 CAPEX Budgets to Maximize Innovation
Innovation is essential for any company that wants to grow. Companies that don’t invest time and money to improve their systems, technologies, and processes are at risk of falling behind competitors.
One essential way companies stay ahead of rivals is by allocating the appropriate number of resources to maintaining and improving their systems. The best time to do this is when companies are setting their annual budgets and deciding how much they’ll commit to capital expenditures.
If your company is trying to decide how to designate a portion of your CapEx spending for tech innovation, here are a few ways to do it and why it’s important.
1. Strategically invest in innovation
Pouring money into technology is only helpful if it’s strategic. Coming up with a long-term strategy and then figuring out what technology and services achieve your company’s goals is the most effective way to budget, Marko Knezovic, COO for Kibernum said.
“Focus on CapEx investments that directly align with your company’s long-term innovation and growth strategies. This entails careful analysis of where innovation is most critical and budget allocation accordingly.”
One efficient way to allocate your CapEx spending is to consider nearshore outsourcing. Hiring an outside tech company to perform specific services can be the best way to increase tech innovation without blowing your company’s budget.
“Outsourcing software maintenance often provides access to a skilled and experienced workforce at a lower cost compared to maintaining an in-house team. Companies can allocate budget resources more efficiently by paying only for the specific services they require,” Marko said.
2. Budget for cost-effective technologies
In addition to figuring out your innovation strategy, you need to create a CapEx budget that allows your company to implement new technology while still being cost-effective. This may include considering nearshore outsourcing benefits that keep your upfront tech innovation investment costs low.
“Embrace cost-effective technologies like cloud computing, open-source software, and scalable infrastructure to reduce upfront capital costs while maintaining the capacity to innovate,” Marko said. “This flexibility allows companies to pay only for what they need.”
Taking a cost-effective approach to CapEx spending can also include outsourcing ongoing tech maintenance instead of having your internal team do the work. Companies can avoid fixed, ongoing costs associated with in-house maintenance, Marko said.
“Outsourcing offers the flexibility to scale software maintenance services up or down as needed, which aligns with budget fluctuations and project requirements.”
3. Allocate resources appropriately
When companies hire new tech employees, they often have specific goals they want them to achieve. But sometimes, ongoing maintenance and routine tasks can keep those employees from reaching the level of innovation your company needs.
McKinsey & Co.’s 2023 technology trends report said that the “importance of talent as a key source in developing a competitive edge” cannot be overstated and went on to say, “A lack of talent is a top issue constraining growth.”
That’s why when your company is setting up its annual budget, putting money aside to hire a nearshore software development team could be a good idea.
“By outsourcing routine software maintenance tasks to specialized providers, companies can free up their internal resources to concentrate on core business activities and innovation. This can lead to increased productivity and competitiveness,” Marko said.
4. Regularly evaluate your tech needs
As critical as it is to create the correct CapEX budget for your technological needs, it’s just as essential to evaluate if your current needs have changed.
“Regularly evaluate your technology infrastructure and systems to identify areas where updates, upgrades, or replacements are necessary. This helps in estimating future tech expenses accurately,” Marko noted.
The McKinsey reports said that in the coming decade, 20% to 30% of the time that workers spend on the job “could be transformed by automation technologies, leading to significant shifts in the skills required to be successful.”
One thing that can help your company prepare for this is to use historical data and forecasting that includes planning for future technological changes. Marko said, “This proactive approach allows companies to allocate sufficient resources for tech expenses while staying adaptable to emerging trends and needs.”
The key to planning a CapEx budget for maximizing innovation is to balance what your company can do internally and what should be outsourced to stay competitive.
“Incorporating these strategies and considerations into your budget planning can help companies balance innovation, cost savings, and effective tech expense management,” Marko said.
Find out how Kibernum can help you innovate without busting your budget. Our company has over 30 years of experience working on projects with the world’s largest corporations. Get in touch with us to find out how we can help you.
