The IT budget line is 40% of the real number. The other 60% is hiding in six places.
The IT budget your CFO sees on the P&L is a fraction of what IT actually costs to run. Six places the rest hides after an acquisition, and the one-hour review that stops the surprises.
FOR: Operators · post-acquisition IT integration
Quick answer
After any acquisition the IT budget line goes sideways and nobody can explain why. It is not a mystery. The visible P&L line is roughly 40% of what IT actually costs. The other 60% is hiding in six specific places. A one-hour post-acquisition review surfaces every one of them. Do it in the first 30 days, not the first 12 months.
A 120-person operator just bought a 30-person operator. The deal closed clean. Everyone is happy.
Three months later the CFO comes into the boardroom holding two spreadsheets. “Our IT budget line is now 40% higher than last year. Nobody can tell me what changed. Nobody can tell me what the number should be. Nobody can even tell me what we are currently spending on.”
This is normal. It happens on every acquisition. It also happens quietly every year even without one, because the IT budget line on the P&L is only the visible part.
Here is the actual math. The visible line is roughly 40% of what IT actually costs. The other 60% is hiding in six places. After any acquisition, all six get worse at the same time.
Hiding place 1. The duplicate SaaS stack from the acquired company
Two CRMs. Two file-shares. Two chat tools. Two ticketing systems. Two accounting integrations. Two of every SaaS tool the acquired company was using, sitting next to two of every SaaS tool you were already using.
Somebody at some point will consolidate. Until then, you are paying twice. And “some point” is usually 12 to 18 months after close, because the acquired team knows their tools, does not want to learn yours, and nobody has the authority to force the switch.
The fastest recovery on any post-acquisition IT budget is a two-week SaaS audit. Every tool. Every seat count. Every renewal date. Every owner. Then a decision on which stack wins. The savings on a mid-market acquisition are usually somewhere between $50K and $200K a year in duplicate license fees alone.
None of that shows up on the P&L as “IT waste.” It shows up as “SaaS spend” spread across ten different departmental credit cards.
Hiding place 2. The license cleanup nobody did
Not duplicates. Ghosts.
The former employee whose Microsoft 365 license is still active six months after they left. The consultant who was given a Salesforce seat for a three-month project two years ago. The five “test” accounts an admin created for a project that never went live. The Zoom Pro seat that renews annually for a person who has been on parental leave for eighteen months.
Every mid-market operator has this. Every acquired company you buy has more of this, because they had less oversight on it. The typical cleanup on a 120-person company that just absorbed a 30-person company finds somewhere between 15 and 40 licenses that are being paid for and used by nobody.
At $30 to $150 per seat per month, that adds up faster than anyone wants to admit.
Hiding place 3. Shadow IT from the acquired staff
This is the one that will get you.
The salesperson at the acquired company kept their pipeline in a personal Notion workspace. The controller has client financials in a personal Dropbox. The project manager was running client calls on a personal Zoom account because “IT was too slow to set one up.” The lead engineer keeps design files on a personal Google Drive.
None of this was in the diligence data room. It was not on any asset list. It did not appear in any interview. But it is real, it is holding your business data, and it is running on personal accounts you do not control and cannot secure.
You will now either pay to move all of that onto your systems (real cost, weeks of work), or you will inherit the security exposure of it (bigger cost, eventually). Either way, it becomes part of your IT bill. It just does not show up under “IT” on the P&L until something breaks.
Hiding place 4. The outsourced provider’s “project work” bucket
Your MSP retainer is a nice round predictable number. Say $12K a month. That is the visible line.
Then there is the “project work” bucket. Onboarding the acquired staff. Migrating email. Standing up VPN access. Reconfiguring the firewall. Untangling the M365 tenant merge. Setting up the SSO integration. Deploying the endpoint agent to the new laptops.
In any acquisition year, project work from the outsourced provider typically runs 2x to 3x the retainer. On a $12K retainer that is another $24K to $36K a month, for four to eight months.
Finance does not code the project work back to “IT.” It gets coded to “M&A integration costs” or “professional fees” or worse, it sits in a general miscellaneous bucket. Which means when the CFO looks at the IT line year over year, the number looks reasonable. And the CFO is wrong.
Hiding place 5. Cyber insurance premium increases nobody codes to IT
New headcount. New revenue. New attack surface from the acquired company’s systems. New sector exposure if the acquired company was in a different vertical.
At the next renewal, the cyber insurance premium goes up. Sometimes 20%. Sometimes 40%. Sometimes the underwriter looks at the acquired company’s security posture, decides they do not like what they see, and adjusts the premium accordingly.
Finance codes the premium to “insurance.” Not “IT.” So when leadership looks at the IT budget year over year, the cyber insurance number stays invisible. But every dollar of that premium increase is a direct cost of running IT, and it should be on the IT scorecard the CFO is looking at.
Hiding place 6. Half-finished integration
Six months after close, the acquired team is still logging into the old email, the old file-share, the old CRM. Every workflow now runs on two systems that were supposed to be one.
That extra time never shows up in the IT budget. It shows up as slower work, missed handoffs, and duplicate data entry. A sales rep who spends 20 minutes a day copying data between the old CRM and the new CRM is $8K a year in lost productivity per rep. Multiply that by everyone doing something similar.
None of this hits the IT line. All of it is the cost of not finishing the integration. And it compounds every month you do not finish it.
The one-hour post-acquisition IT review
Not fixable in the boardroom three months after close. Fixable in the first 30 days.
- Pull every SaaS invoice from both companies going back 12 months. Not just IT’s invoices. Every departmental card. Every “professional development” charge that turned out to be a Zoom Pro seat. Add them all up.
- Run a license utilization report on every major platform. Microsoft 365. Google Workspace. Salesforce. Adobe. Whatever else is over $10K a year. Look for seats that have not been touched in 60 days. Cancel them.
- Survey the acquired staff, honestly, about what tools they are actually using. Include personal accounts. Frame it as “what do you need us to give you an official version of.” You will be surprised what comes back.
- Ask your MSP for a fixed-price integration quote. Not hourly. Fixed. If they will not give you one, get one from someone else. Hourly project work is where the bill quietly triples.
- Get the cyber insurance renewal number now, before renewal. Ask the broker to model the premium against the combined company. Budget for the increase now, not the day the renewal quote lands.
- Set an integration deadline and enforce it. Twelve months maximum. Every extra month is real money you are paying for nothing.
The one takeaway
The IT budget line on the P&L is not the IT budget. It is the visible fraction of it. On an acquisition year it can be as low as 30 or 35% of the real number.
The other two thirds are findable. They are just not currently coded to IT. Once you know the six places to look, you can put a real number on the CFO’s desk. And you can defend it.
— James
This is one operator’s read of the actual cost of mid-market IT, informed by nineteen years of running IT integrations across 30+ M&A transactions. Every organization is different. Every acquisition is different. Use this as a lens for asking the right questions, not as a specific financial framework.