Cybersecurity budget planning for 2026: How MSPs can help clients invest smarter

According to the 2025 State of SMB Cybersecurity Report by ConnectWise and Vanson Bourne, 57% of small and midsized businesses (SMBs) now rank cybersecurity as their top business priority, a 14-point increase from last year. Yet 58% spent more than they originally budgeted in 2024, showing how unpredictable and costly unplanned risks and the costs of recovery and business continuity for their customers have become.

This growing mismatch between investment and preparedness highlights why it’s critical for managed service providers (MSPs) and IT departments to guide clients through intentional, risk-based cybersecurity budgeting. In an environment where 61% of SMBs fear a major cyberattack could shut down their business, strong financial planning is the first step toward resilience.

As I highlighted during the product keynote at IT Nation Connect™ Global this year, real preparedness now depends on the ability to detect, decide, and recover with automation supporting every step. Hyperautomation and emerging agentic capabilities are shifting how organizations respond to incidents by reducing human workload and accelerating response cycles.

When security and IT operations run in isolated workflows, resolution slows, and recovery becomes unpredictable. When they run together inside an integrated environment supported by automation, outcomes improve. This is the direction the industry is moving in, and it is shaping how cybersecurity budgets need to be built.

Factors influencing cybersecurity budget planning

Every organization’s cybersecurity budget is shaped by a combination of environmental, operational, and strategic factors. MSPs can strengthen their advisory role by grounding their recommendations in the factors most directly tied to risk.

1. AI adoption and oversight

AI is both an accelerant and a liability. While it can strengthen defense through predictive analytics, 83% of SMBs say it has also increased risk exposure. Despite this, only 51% have implemented security policies and practices for AI and genAI use, leaving significant exposure. Budgets should include dedicated funding for AI governance, training, and defensive automation.

2. Cloud migration and hybrid infrastructure
The ongoing shift to cloud computing and hybrid IT environments is redefining security spending. As workloads move to software-as-a-service (SaaS) platforms, public clouds, and virtual networks, traditional perimeter defenses no longer suffice. Identity management, access control, and cloud-native backup must now be considered baseline budget categories.

3. Regulatory pressure
Compliance frameworks such as NIS2, GDPR, and HIPAA continue to evolve, adding new requirements for data privacy, reporting, and accountability. These laws create budgetary pressure across all industries, regardless of size or sector.
Organizations must allocate funds for policy documentation, data classification, encryption, audit readiness, and compliance reporting. MSPs can use compliance mapping as a framework to justify these costs, showing that regulatory adherence protects clients from legal exposure and reputational damage. Regular reviews, legal consultation, and audit preparation should be line items in every cybersecurity budget.

4. Client profile
Cybersecurity spending varies by client profile. Smaller SMBs rely on standardized managed services, while large enterprises need modular tiers that scale across global operations. Industry regulations and complex tech stacks further drive variance. MSPs can benchmark spending against risk exposure, ensuring clients invest proportionally to complexity. 

How to build a cybersecurity budget that reflects real risk

Cybersecurity budgeting must be evidence-based. MSPs can help clients understand what their actual risks cost and how targeted investment prevents unnecessary disruption.

1. Start with a risk assessment and business impact analysis
According to our research, 61% of SMBs fear a breach could put them out of business, underscoring why data-driven prioritization is essential.

A risk assessment clarifies the threats and vulnerabilities affecting the client, while a business impact analysis (BIA) identifies which business functions are most critical.

A BIA clarifies the operational, financial, and reputational impact of downtime. This insight directly informs business continuity and disaster recovery (BCDR) planning, because it identifies where even short interruptions can trigger serious consequences. With hyperautomated and agentic recovery workflows now available, mapping the highest-value systems ensures those systems trigger automated restoration sequences first. This reduces both the time and human effort required to bring the business back online.

For example, if a manufacturing client’s production line depends on continuous network uptime, a single ransomware-related outage could halt operations for hours or days. Quantifying that loss transforms security spend from an abstract cost to a tangible business safeguard.

2. Align cybersecurity goals with business outcomes
To ensure accurate budgeting, identify the cybersecurity risks unique to your client’s environment, as they will form the basis for their budgeting objectives. Budgeting in cybersecurity is more nuanced than merely setting aside a lump sum; it necessitates a strategic approach. Ensure your clients establish an annual budget incorporating regular financial reviews to align spending with evolving threats and objectives.

Use KPIs, such as the ConnectWise Security Dashboard’s MSP Security Score, which measures an organization’s security posture based on five categories: endpoint, network, vulnerability, identity, and data. This comprehensive assessment empowers clients to take proactive measures and prioritize actions to minimize risk. 

One great way to ensure this is all on track is to implement quarterly business reviews (QBRs). These reports allow your team to examine client cybersecurity progress more closely and ensure that budgets are allotted in accordance with their business objectives.

By tightly weaving objectives and KPIs into a cybersecurity budget, your clients have a financially responsible and strategically sound roadmap that supports resilience, compliance, and performance.

3. Create an inventory of IT assets
A comprehensive inventory of your client’s IT assets is a cornerstone for cost-effective budget allocation. The inventory should include software, hardware, networks, data, and cloud applications, all of which serve as pillars of a client’s cybersecurity strategy.

Begin by categorizing IT assets based on their critical and sensitive nature. Recognizing the varying degrees of value and risk among assets enables you to help your clients prioritize their cybersecurity investments more wisely. High-value or high-risk assets require stronger protection and, therefore, larger budget allocations. Continual discovery and automated asset tracking tools ensure that the inventory remains current as clients adopt new technology, migrate workloads, or expand into the cloud. 

This proactive approach prevents budget misalignment by ensuring that new endpoints, applications, or identities are accounted for in security planning. A living, accurate inventory improves visibility, enables smarter prioritization, and ensures that financial resources are directed where they will have the most impact.

4. Prioritize risks

While a comprehensive IT asset inventory informs clients of where they are currently allocating resources, prioritizing risks makes budgeting forward-looking. Guide your clients to allocate funds based on detailed risk-based vulnerability management, zeroing in on the most critical vulnerabilities with the highest potential impact.

Use frameworks such as NIST or ISO 27005 to rank risks by severity and probability. Incorporate vulnerability management data to assess exposure levels and develop mitigation plans. For instance, critical vulnerabilities on externally facing systems or unpatched endpoints may require immediate investment in automated patch management or endpoint detection and response (EDR). 

Risk prioritization transforms cybersecurity budgeting into a strategic exercise in cost optimization. By targeting the most consequential threats first, clients see a measurable return on their investment while reducing the likelihood of catastrophic incidents. 

Strengthen resilience with cloud backup and SaaS data recovery

Microsoft 365® adoption continues to soar, leading to billions of new files created daily. With that comes increased exposure to accidental deletion, identity compromise, and insider risk.

Cybersecurity budgets need a dedicated line for SaaS backup and recovery. Pairing modern cloud backup with agentic automation enables systems to execute recovery workflows, maintain version history, and reinstate permissions with minimal human involvement. The result is predictable, fast restoration, and reduced financial and operational impact during disruptions.

Balance prevention, detection, and recovery

A balanced cybersecurity budget allocates funding across the full lifecycle of risk.

Prevention

Endpoint protection, network segmentation, access control, and continuous training remain essential. Prevention reduces exposure and prevents the most common causes of breaches.

Detection

Detection is shifting from manual alert review to agentic workflows. Modern systems correlate events, surface risk patterns, and generate recommended actions automatically. This reduces the dependency on human review, accelerates escalation, and strengthens response consistency.

Recovery

Recovery tools, including BCDR, cloud backup, and identity restoration technologies, must support rapid response. Automated snapshots, one-click restoration, and agentic recovery sequences reduce downtime by removing manual friction. This ensures organizations can stabilize operations at a pace that matches modern threats.

Estimate costs for technologies and tools

The growing complexity of today’s threat landscape requires a mix of modern tools, including security software, firewalls, intrusion detection systems, and alert and log management tools.

When estimating costs, look beyond the initial purchase price. Ongoing licensing, maintenance, and integration costs often represent the majority of total ownership expenses. For MSPs, partnering with vendors who provide clear pricing models and predictable renewals is vital to help clients plan accurately.

Comprehensive solutions, such as security information and event management (SIEM) integrated with a managed security operations center (SOC), can reduce tool sprawl and lower long-term operational costs. They provide continuous visibility while consolidating multiple functions into one managed service, resulting in stronger protection and cost efficiency.

Allocate funds for training

Cybersecurity success depends as much on people as it does on technology. Human error remains one of the most common causes of breaches, so investing in employee cybersecurity training delivers strong returns.

Encourage clients to allocate budget toward:

• Regular phishing simulations and awareness campaigns
• Training modules focused on password hygiene, data handling, and secure device use
• Certifications that validate employee understanding of security policies

By turning users into active participants in defense, MSPs help clients reduce incident rates while improving compliance with internal policies and external standards.

Create a contingency fund

Even the most carefully planned budgets need flexibility for unexpected events. Cyber incidents, regulatory changes, and vendor cost fluctuations can introduce new expenses midyear.
Encourage clients to set aside a contingency fund specifically for unplanned security events. This reserve enables quick responses to emerging threats, such as zero-day exploits, and ensures continuity of protection without disrupting other budget priorities.

A contingency fund reflects maturity in cybersecurity governance and demonstrates that clients are prepared to act decisively rather than reactively.

Plan for AI-specific safeguards
Only 51% of SMBs have implemented AI security policies, leaving a significant gap in readiness. As AI becomes embedded in everyday workflows, MSPs should ensure budgets include funding for:

• AI risk assessment and model validation processes
• Staff training on responsible AI use and data privacy implications
• Monitoring tools that detect data leakage or misuse in AI-driven systems

AI security is not a future concern; it is an immediate need that intersects with identity management, access control, and compliance. Budgeting now for AI oversight protects clients from both operational disruption and reputational harm.

Establish recurring review cycles
Cybersecurity budgets are not static. Threats evolve, technologies mature, and business priorities shift. Conduct quarterly or semiannual budget reviews to ensure financial plans remain aligned with actual risk conditions.
During these sessions, MSPs can present measurable outcomes using metrics such as mean time to detect (MTTD), mean time to respond (MTTR), or improvements in vulnerability remediation rates. This accountability strengthens client confidence and reinforces the MSP’s value as a proactive partner.

Regular reviews also provide an opportunity to identify underused tools, consolidate overlapping services, and reallocate funds toward higher-impact initiatives. By maintaining continuous visibility into both performance and spend, MSPs help clients keep cybersecurity investments strategic, not reactive.

The MSP opportunity: how to guide the cybersecurity conversation

Cybersecurity spending is increasing, but without a strategy, it becomes a reactive cost instead of proactive protection. 45% of SMBs cite reliability as their top challenge, and 79% say they would consider legal action against an MSP after a major breach.

MSPs can differentiate through transparency and by guiding clients toward integrated, outcome-focused operational models. Operating within an integrated platform reduces human capital strain by eliminating redundant tasks, improving workflows, and closing the gaps between SEC-ops and IT-ops. In practice, this accelerates response times, strengthens service quality, and improves recovery outcomes. Agentic automation amplifies these gains by correlating signals, prioritizing activity, and executing early remediation steps without waiting for human involvement. This is how MSPs move from reactive firefighting to predictable, value-driven execution that clients can trust.

Cybersecurity budgeting is no longer about deciding which tools to buy. It is about investing in automation, integration, and agentic capabilities that help organizations react as fast as threats emerge. MSPs who guide clients toward these operational models help them build resilience that scales, regardless of staffing or budget constraints. This approach transforms cybersecurity from a cost center into a strategic outcome driver, strengthening both protection and long-term partnership.