How Much Should Your Company Be Spending on IT?
If you run an animal feed company, you know that margins are thin, logistics are complex, and the window for error is narrow. When your team brings a technology budget to the table, how do you know whether the number is reasonable? Without a dedicated technology executive to pressure-test the ask, it is easy to slide into reactive spending, which can turn manageable daily maintenance into an operations killer at the worst possible moment.
The good news is that there is a straightforward benchmark every feed executive should have in their back pocket.
The Benchmark: 3-5% of Revenue
Industry research and experience across hundreds of businesses consistently points to the same benchmark: most companies should allocate between 3% and 5% of annual revenue toward IT. For an animal feed operation, that covers the systems most critical to day-to-day function: feed formulation and ration-balancing software, order management platforms, delivery route optimization, commodity procurement and inventory systems, cybersecurity, and the integrations that tie them together. It’s not just your internet bill and a few laptops. Treat this 3-5% metric as a starting point, not a ceiling. The feed companies that excel typically spend above it.
If your current expenditure is materially below the low end of that range, you are likely underinvesting, and the associated risks are real.
Why This Range? What Drives the Number?
The 3-5% benchmark reflects the real cost of running a secure and functional technology environment in today’s business landscape. Here is what it covers and why each element matters specifically to a feed operation:
Security and compliance: Feed mills are increasingly targeted by cybercriminals because agricultural businesses tend to have weaker defenses. Feed companies must also maintain documented records under the FDA’s FSMA Preventive Controls for Animal Food rule, which are far easier to satisfy with modern systems than with paper-based processes.
Business continuity: Downtime in feed has immediate consequences. If your order management platform goes offline, delivery schedules collapse. If formulation software is unavailable, rations cannot be adjusted. A missed or incorrect delivery can affect a dairy customer’s milk production within 24 hours.
Productivity and infrastructure: Your team depends on purpose-built systems like formulation platforms, commodity pricing tools, feed mill ERP, and farm account CRM. Keeping them updated determines whether drivers know what to deliver, nutritionists can manage custom mixes efficiently, and billing closes accurately.
Scalability: The cost of underspending on IT frequently surfaces when businesses try to grow. Systems built for 50 farm accounts often cannot handle 150 without expensive, rushed upgrades. Steady investment keeps infrastructure from becoming a bottleneck on growth.
Where Companies Go Wrong
The most common mistake in the feed industry is treating IT as a cost center to minimize rather than an operational investment with measurable returns. This leads to three predictable patterns:
Reactive spending: IT investment becomes a series of emergency responses. For example, a delivery system fails mid-season, a formulation database corrupts with no backup, or a billing platform goes out of support without a migration plan. These fixes are performed under pressure, with no time to check whether the solution fits the overall technology strategy. The result is a point solution, which solves today’s emergency and creates problems tomorrow.
Invisible underspending: Formulation software that hasn’t been updated for three years may be calculating rations against outdated ingredient databases. Margins calculated by hand when markets change are susceptible to constant leakage compared to automatic weekly cost updates. Order management tools on unsupported infrastructure are a single failure away from taking your order desk offline. Smooth operations are not the same as safe operations.
Shadow IT proliferation: When employees can’t get the tools they need, they improvise. Drivers coordinate deliveries over text messages, nutritionists manage rations in local spreadsheets, and account managers keep customer notes in tools that vanish when they leave. Every workaround is a compliance and continuity risk, and that critical information isn’t available to the rest of the organization.
How to Calibrate Within the Range
The right number for your feed business depends on your operational complexity.
Stay closer to 3% if you operate a single mill with a stable customer base, sell commodity feeds with limited custom formulation, and your technology needs are well-established and largely unchanged year after year. Go closer to 5% if you handle custom premix or specialty ration work, run multiple mill or delivery locations, navigate regulatory requirements for medicated or organic feeds, are actively growing your customer base, or have experienced IT-related disruptions in the past.
The 3-5% benchmark is a floor for operational stability, not a ceiling for strategic investment. Companies investing in proprietary formulation tools, precision analytics, or digital ordering routinely spend above 5%, and that gap is where the competitive separation happens.
The reality for most small and mid-sized feed companies is that current IT spending sits well below this range and in many cases, under 1% of revenue. Operations continue, but often on aging systems and manual workarounds that quietly accumulate into real operational and security risk. Getting from under 1% to the 3-5% range is not a single budget decision. It is a phased progression. A crawl, walk, run framework provides a practical path forward.
Crawl: Stabilize what you have. Patch critical vulnerabilities, bring systems under support contracts, and establish a defensible cybersecurity posture.
Walk: Layer in the tools that drive operational performance. Implement an integrated order management platform, a current formulation system, and the connections between them. Returns become measurable, and the internal case for continued investment builds.
Run: Once foundational systems are stable, invest in what differentiates. This includes precision analytics, AI-assisted formulation, and infrastructure built to support growth.
The largest operators, Cargill, ADM, and Bunge, are already running. Mid-market feed companies do not need to match that scale overnight, but they need to start moving. The ones that do will be in a stronger competitive position than those waiting for disruption to force the issue.
What the Data Shows in Agriculture and Food
The benchmark is well-supported by independent research. According to Computer Economics by Avasant, agriculture and food companies typically allocate between 2% and 4% of revenue toward IT, with mid-market operators and those undergoing active modernization trending toward the upper end. When you include software, cybersecurity, vendor support, and integration costs often tracked outside the core IT budget, well-run companies reliably land in the 3-5% zone.
The largest players in agricultural commodities have made the case through their actions. Cargill has built a Digital, Technology and Data organization of over 7,000 employees and opened a dedicated technology hub in Atlanta. ADM has cited “higher global technology spend” as a driver of overhead increases across multiple consecutive reporting cycles. Bunge completed a major SAP S/4HANA implementation and continues to invest in AI and cloud-based enterprise applications.
None of these companies publish IT expenditure as a specific line item, but the trajectory is unmistakable. The most sophisticated operators in agriculture are increasing technology investment year over year, and mid-market feed companies should be doing the same.
For a $20 million feed company, 3-5% translates to a $600,000–$1 million annual technology budget, which is enough to cover an order management platform, a formulation system, delivery tools, and cybersecurity infrastructure. Done right, that investment pays for itself in reduced waste, fewer errors, stronger retention, and the capacity to scale.
A Note for Companies Without a CTO
Most animal feed companies in the $10M–$100M range do not employ a dedicated CTO. That means IT strategy defaults to the CEO, COO, or CFO, without the context to evaluate vendor claims, assess whether a system fits a feed operation, or identify which risks are quietly accumulating from deferred decisions.
Benchmarks are a useful anchor, but they work best alongside a periodic review of what you are spending and where your gaps are. An outside perspective with agricultural and feed industry experience keeps decisions grounded in operational reality rather than vendor narratives.
Conclusion
IT spend is one of the most consequential and least-examined line items in a feed company’s budget. The 3-5% benchmark gives leadership a defensible starting point and a check on whether the business is positioned to operate securely and efficiently as it grows. For an industry that runs on tight margins, precise formulations, and reliable delivery, getting this right is an operational requirement.
Moving from where most feed companies are today toward the 3-5% range requires intentional planning across budgets, processes, and capital allocation. It is not simply a matter of spending more. It is about knowing where investment produces the greatest return, sequencing decisions in the right order, and building toward a technology environment that supports rather than limits the business.
The feed companies that treat IT as a managed, strategic investment consistently outperform those that treat it as an afterthought. The question is not whether to invest. It is whether you are investing wisely.
Captios Partners works with mid-market companies, including businesses in the livestock feed and agricultural supply chain, to bring structure and clarity to operational and technology decisions. If you are ready to take a hard look at your IT expenditure and where to place your technology bets for the greatest impact, reach out directly to Michael at pelsoci.michael@captiospartners.com.
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