How much do companies spend on backup per employee per year?

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How much do companies spend on backup per employee per year?

Our research indicates that backup and recovery are usually presented as one component of the IT budget. Based on figures provided by Spiceworks, Gartner, and ProStratus, it is likely that the annual backup and recovery budget per employee for the annual revenues you specified ranges from $1,216 to $2,491. Complete details are provided in the attached spreadsheet.

BACKUP AND RECOVERY'S SHARE OF THE IT BUDGET

Several resources demonstrate that backup and recovery go hand in hand. For example, both Spiceworks, an IT professional network, and Markets and Markets, a market research firm, recently published reports that indicate backup and recovery are two things that are closely related. In Spiceworks' report, "The 2018 State of IT," backup/recovery was listed as one component of the IT budget. In Markets and Markets' report, on the other hand, backup and recovery were presented as one market or industry. According to SearchDataBackup.com, a site providing IT professionals with news and advice on backup and recovery, "the process of backing up data is pivotal to a successful disaster recovery (DR) plan."

Backup and recovery's share of the IT budget is best described by the following statistics provided in Spiceworks' report for North America, which we assume is the region you are most interested in.

a. Backup/disaster recovery accounts for 8% of the software budget, which, in turn, accounts for 26% of the IT budget. This means backup/disaster recovery software accounts for 2.08% (or 8% of 26%) of the IT budget.

b. Online backup/recovery accounts for 16% of the hosted/cloud-based services budget, which, in turn, accounts for 22% of the IT budget. This means backup/recovery hosted/cloud-based services account for 3.52% (or 16% of 26%) of the IT budget.

c. Managed storage/backup accounts for 10% of the managed services budget, which, in turn, accounts for 14% of the IT budget. This means managed storage/backup services account for 1.4% (or 10% of 14%) of the IT budget.

The sum of these three components reveals that backup/recovery accounts for 7% (or 2.08% + 3.52% + 1.4%) of the IT budget.

IT BUDGET AS A PERCENTAGE OF REVENUE

Since you want the backup budget per employee to be presented as a function of the company revenue, we looked for information on how the IT budget changes with revenue. In North America, the median IT budget across all sectors is 2.3% of revenue. This is based on the "IT Spending & Staffing Benchmarks" report for 2017/2018 of Computer Economics, a provider of metrics for use by IT management. The report contains the results of Computer Economics' survey of 202 organizations in Canada and the United States.

It appears the percentage was higher in previous years. In 2015, the percentage was 3.30%, according to the Information Services Group, while in 2016, the percentage was 3.5%, according to Gartner.

Meanwhile, according to managed IT service provider ProStratus, the percentage decreases with company size. Small businesses spend 6.9% of revenue on IT, medium businesses spend 4.1%, and enterprise or large businesses spend 3.2%.

ESTIMATED BACKUP AND RECOVERY BUDGET PER EMPLOYEE

While the backup and recovery budget per employee, by company revenue, is not readily available, it can be triangulated in the following ways:

1. Conversion of revenue to number of employees

For example, we know that backup/recovery accounts for 7% of the IT budget, and the IT budget accounts for 2.3% of revenue. Therefore, we can estimate that backup/recovery accounts for 0.161% (or 7% of 2.3%) of revenue.

If a company has a revenue of $5 million, then its backup/recovery budget must be around $8,050 (or 0.161% of $5 million). Given that the median revenue per employee across all sectors is likely to be around $0.63 million, we can estimate that the company has around 8 employees (or $5 million / $0.63 million per employee). Dividing the backup/recovery budget of $8,050 by 8 employees will give us an estimated backup/recovery budget per employee of $1,006.25.

2. Conversion of number of employees to revenue

For example, according to Spiceworks, the following statistics apply to companies with less than 100 employees.

a. Backup/disaster recovery accounts for 7% of the software budget, which, in turn, accounts for 25% of the IT budget. This means backup/disaster recovery software accounts for 1.75% (or 7% of 25%) of the IT budget.

b. Online backup/recovery accounts for 19% of the hosted/cloud-based services budget, which, in turn, accounts for 23% of the IT budget. This means backup/recovery hosted/cloud-based services account for 4.37% (or 19% of 23%) of the IT budget.

c. Managed storage/backup accounts for 10% of the managed services budget, which, in turn, accounts for 11% of the IT budget. This means managed storage/backup services account for 1.1% (or 10% of 11%) of the IT budget.

The sum of these three components reveals that backup/recovery accounts for 7.22% (or 1.75% + 4.37% + 1.1%) of the IT budget.

Gartner considers companies with less than 100 employees as small, so we could use the figure provided by ProStratus for small businesses to estimate the IT budget. According to ProStratus, small businesses spend 6.9% of revenue on IT. We can therefore estimate that backup/recovery accounts for 0.49818% (or 7.22% of 6.9%) of revenue.

Again, if a company has a revenue of $5 million, its backup/recovery budget must be around $24,909 (or 0.49818% of $5 million). And since, according to Gartner, a small business is one with less than 100 employees or one with less than $50 million in revenue, we can estimate that the average revenue per employee among small businesses is $500,000 (or $50 million / 100 employees). And we can estimate as well that the company has around 10 employees (or $5 million / $500,000 per employee). Dividing the backup/recovery budget of $24,909 by 10 employees will give us an estimated backup/recovery budget per employee of $2,491.

You may see in Sheet1 of the attached spreadsheet our computations for the following company sizes defined in Spiceworks' report: 1-99, 100-499, 500-999, 1,000-4,999, and 5,000+. And in Sheet2, you may see the estimated backup/recovery budget per employee for the following revenues you specified: $1 million, $5 million, $10 million, $50 million, $100 million, and $1 billion.

Please note, however, that according to ProStratus, the average annual cloud backup cost per user is less than $50.

CONCLUSION

Available figures indicate that only the backup and recovery budget per employee could be triangulated, as backup and recovery go hand in hand. There is a good chance that the amount companies spend on backup and recovery per employee in a year ranges from $1,216 to $2,491, if figures provided by Spiceworks, Gartner, and ProStratus are considered. The attached spreadsheet shows how the amount varies across the revenues you specified.
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