Last updated: November 3, 2026
A CFO-owned 2027 IT budget should split contract labor into three lines, run support, project work, and CapEx-eligible development time, and price each one at real bill rates instead of a single guess. KORE1-placed ERP consultants bill a median $91 an hour, project managers $116, and systems administrators $57 (KORE1 Contract Rate Index 2026-Q4). FASB’s ASU 2025-06 rewrites the software capitalization rules for annual periods beginning after December 15, 2027.
October is when the IT budget lands on the CFO’s desk at a company with no CIO. I know because I’m usually the guy who gets the call a week later.
The file is mostly renewal dates. Microsoft, the ERP, the firewall subscription, a phone system nobody likes. Those are easy, mostly, because you type in last year’s number, add whatever percentage the account rep threatened you with on the renewal call in August, and move on to the next tab.
Then there’s the people part.
Specifically the people who don’t work for you. The NetSuite consultant who’s been “finishing up” since March. The help desk tech covering for a resignation. A project manager you’ll need for the warehouse rollout that the board already approved and that nobody has staffed yet. All of that gets lumped into one line, estimated by squinting at last year’s invoices and adding a bit, and I’d argue it’s the single worst-built line in most mid-market budgets I see. Worse than the cloud bill. Way worse.
Bias first. I run a consulting group, and KORE1, whose site you’re on, places contract IT people through its IT staffing services, including the contract staffing seats I’m about to price. We both make money when you hire outside help. If your whole IT world is two people and a managed service provider, you probably don’t need this post. Everyone running a real project next year probably does.
Watch: Where Contract Labor Goes in a 2027 IT Budget
Video chapters
- 0:00 — Which IT Budget Lines Move in 2027
- 0:54 — What Is Inside a Contract Bill Rate
- 1:37 — Which Contract Labor Can Be Capitalized
- 2:18 — Funded Initiatives You Can’t Push Into 2027
- 2:54 — How Cost of Capital Changes the Mix
- 3:25 — Common Questions
Read full transcript
October is when the IT budget lands on the CFO’s desk at a company with no CIO. The renewals are easy. You type in last year’s number, add whatever the account rep threatened, and move on. Then there’s the people part. The people who don’t work for you. The NetSuite consultant who’s been finishing up since March. The help desk tech covering a resignation. All of it gets lumped into one line, estimated by squinting at last year’s invoices. It’s the worst-built line in a lot of mid-market budgets. Worse than the cloud bill. So split it three ways. Run support keeps the lights on. Project work shows up for a defined job and leaves. And some project time, the part that builds internal-use software, may be CapEx eligible. Then price each seat at real bill rates, not salaries. KORE1-placed ERP consultants bill a median ninety-one dollars an hour. Project managers, a hundred and sixteen. Systems administrators, fifty-seven. Help desk, forty-nine. At forty hours a week, a three-month contract project manager costs about sixty thousand four hundred dollars. Six months is about a hundred and twenty thousand nine hundred.
Somebody always asks why the contractor costs a hundred and sixteen dollars an hour when the salary for that job looks so much lower. Fair question. Devin Hornick, a partner at KORE1, walks through it with round numbers. Say the pay is a hundred dollars an hour. About twenty-four percent burden in California makes it a hundred and twenty-four loaded. A bill rate near a hundred fifty to a hundred sixty covers that, plus recruiting and margin. Burden isn’t made up. Employer Social Security, Medicare, unemployment, workers’ comp, and California’s paid sick leave. Somebody writes those checks every pay period. Now the part that actually costs CFOs money. When a firm quotes you a markup, ask what it’s sitting on. The contractor’s pay, or the loaded cost after burden? Two firms can quote the same-sounding number and bill you very differently. For the budget itself, use bill rates. That’s the invoice.
Can any of it be capitalized? Some of it. Sometimes. As Devin put it, the contract allows that company to write it off as a CapEx, if they’re working on a development project. A contract developer building custom NetSuite scripts is a candidate. A help desk tech resetting passwords isn’t. And the rules are moving. FASB’s A S U twenty twenty-five oh six drops the project stages, and it applies to annual periods beginning after December fifteenth, twenty twenty-seven. Early adoption is allowed. So a calendar-year company budgeting twenty twenty-seven is still on the old stages unless it adopts early. That’s your auditor’s call, not your staffing firm’s, and this isn’t accounting advice. Walk in with the contract seat list. For each project seat, ask which project the time belongs to, and whether its funding has been formally approved.
Honestly? Start the whole budget here. Every company has projects that already have a yes. The board approved it. The money’s earmarked. Then the hiring budget gets tight, nobody can add headcount to do the work, and it slides. Ask four questions. What’s already funded that you can’t push into twenty twenty-seven? Where are you asked for more productivity without adding headcount? Which projects have executive sponsorship? And what breaks if the money isn’t spent? Some dates won’t move. Windows Server twenty sixteen reaches the end of extended support on January twelfth, twenty twenty-seven. And a company that won’t approve three or four permanent hires will often approve the contract team it needs to finish an initiative that already has funding.
In September the Fed raised its target range to three point seven five to four percent. Money got more expensive, and pricier capital pushes toward cost you can turn off. A contractor is a line that ends when the work ends. KORE1’s median contract assignment runs a hundred and sixteen days. Thirty-seven and a half percent of its contract placements convert to permanent hires. And offer to start is a median of three days. None of that means contract everything. If you’ve had the same contract sysadmin for three years running, that’s not flexibility anymore. It’s a payroll decision you keep postponing. Choose line by line, instead of defaulting.
Do you budget contractors at their salary or their bill rate? Bill rate. Always. The invoice is what hits your P and L. Should the twenty twenty-seven budget assume the new FASB rule? Only if you’re adopting it early. Ask your auditor in the planning meeting, not in March. Before your next budget meeting, list every person who does IT work for you and isn’t on your payroll. Name, rate, start date, and run or project next to each one. A seat nobody remembers approving usually turns up. Better to find it in October. The full guide and the current bill rates are at KORE1.com.
Which IT Budget Lines Actually Move in 2027?
IT budget planning is the yearly process of forecasting technology spend line by line, covering software licenses, infrastructure, run support, projects, and the people who deliver them. For a CFO who owns IT, the line that moves most is contract labor, because it rises and falls with projects instead of with headcount.
Four buckets. That’s all I care about when I open one of these files.
Licenses barely move. They creep up, you grumble, you sign. Infrastructure moves when something hits end of life, which is a date printed on the vendor’s website years in advance, so there’s genuinely no excuse for being surprised by it, and yet every year somebody is. The ERP project, if you have one, is the big swing, and it’s almost never budgeted at what it’ll actually cost because somebody quoted the software and forgot the humans.
And contract labor. Which is really two different animals wearing the same name, and treating them as one is how a help desk tech ends up in the same bucket as the person rebuilding your order-to-cash process, which makes no sense to anybody once you say it out loud.
Run labor keeps the lights on. Help desk, a sysadmin, somebody patching servers on Saturdays. Operating expense. Boring. Never ends. Project labor shows up for a defined piece of work and leaves when it’s done, or at least it’s supposed to. Some project labor, the part that builds or configures internal-use software, may qualify to be capitalized. May. Your auditor decides that, not me. We’ll get there.
Here’s what each of those seats costs at KORE1’s actual bill rates, which is what lands on your invoice. Not salaries. Not a blended guess.
| Contract seat | Budget line | Bill rate, median (range) | 3 months | 6 months | Index cell |
|---|---|---|---|---|---|
| ERP / NetSuite consultant | Project, flag for CapEx review | $91 ($73 to $123) | $47,200 | $94,400 | KORE1 observed, 15 placements, multi-state |
| IT project manager | Project, flag for CapEx review | $116 ($105 to $124) | $60,400 | $120,900 | KORE1 observed, 21 placements, primarily Southern California |
| Systems administrator | Run | $57 ($54 to $70) | $29,600 | $59,300 | KORE1 observed, 12 placements, primarily Southern California |
| Help desk technician | Run | $49 ($41 to $55) | $25,500 | $51,000 | KORE1 observed, 39 placements, primarily Southern California |
| Network engineer, mid level | Run or project, depends on the work | $106 ($95 to $120) | $55,300 | $110,600 | Modeled, United States national |
Costs assume 40 hours a week for 13 or 26 weeks at the median. Observed cells come from KORE1 W2 contract placements that started 2023 to 2026, five or more per cell. The modeled network cell uses BLS wage data plus a 24% employer burden, run through the bill ranges KORE1 sees on its own placements. How it’s built is on the Contract Rate Index methodology page, and the other roles are in tech contractor hourly rates.
Southern California skews a few of those up. If your team sits in Boise, shade them down. Rates also drift with how niche the skill is, and a NetSuite consultant who has done three WMS integrations is not going to bill like one who has mostly built saved searches, so treat the median as the middle of a conversation and not the end of one. If you’d rather not guess, get 2027 bill rates for your contract lines by role, quarter, and metro, and tell them whether each seat is run or project so the quote comes back already sorted.
What Is Actually Inside a Contract Bill Rate?
First budget meeting, somebody always asks why the contractor costs $116 an hour when the salary for that job looks so much lower. Fair question. Annoying answer. Let’s do it anyway.
Devin Hornick, a partner at KORE1, walked through it on an internal call in October using round numbers. Say the contractor’s pay is $100 an hour. As an example. Employer burden runs about 24% in California, which is $24, and that money covers payroll taxes, required insurance, and state-mandated sick pay. Now you’re at $124 loaded, before the staffing firm has earned a dime. A bill rate somewhere around $150 to $160 covers the loaded cost plus recruiting, account management, and margin.
Burden isn’t made up. It isn’t optional either. The IRS Publication 15 puts the 2026 employer Social Security share at 6.2% on wages up to $184,500 and Medicare at 1.45% with no cap. Federal and state unemployment get stacked on that. Then workers’ comp. Then California’s paid sick leave rule, which says employers have to allow at least 40 hours or five days a year. Every one of those is a real check. Somebody writes it every pay period. The full breakdown sits on KORE1’s contractor burden rate page if you want to check the 24%.
Now the part that actually costs CFOs money. Pay attention here.
When a firm quotes you a markup, ask what it’s sitting on. Is it on the contractor’s pay, or on the loaded cost after burden? A lot of quotes leave burden out of the conversation entirely, so a percentage that sounds lean can produce an invoice that isn’t. Two firms can quote the same-sounding number and bill you very differently. One question in the first call clears it up, and if the firm gets weird about answering, well, that’s your answer too.
For the budget itself, use bill rates. That’s the invoice. That’s what hits your P&L.
Which Contract Labor Can Be Capitalized?
Short version? Some of it. Sometimes. And not by me.
Devin put the upside plainly on that same call. “The contract allows that company to write it off as a CapEx, if they’re working on a development project.” Development project is doing a lot of heavy lifting in that sentence. A contract developer building custom NetSuite scripts for your new order flow is a candidate. A help desk tech resetting passwords is not, and no amount of creative coding on a timesheet makes them one.
And the rules are moving under you, which is why this is a 2027 problem. Today, ASC 350-40 splits internal-use software into project stages, and only the development stage gets capitalized. FASB’s ASU 2025-06 came out in September 2025 and kills the stages. Instead, you can start capitalizing once management has authorized and committed the funding and it’s probable the thing gets finished and used the way it was meant to be. Effective for all entities in annual periods beginning after December 15, 2027. Early adoption’s allowed.
So a calendar-year company budgeting 2027 is still on the old stages. Unless it adopts early. That’s a decision. Not your staffing firm’s. Not mine.
I’m not your accountant and this isn’t accounting advice. What I’d do is walk into the auditor’s office with these four questions and the contract seat list.
- Are we adopting ASU 2025-06 early, or staying on the stage model through 2027?
- For each project seat on the list, which project does that person’s time belong to, and has funding for it been formally approved?
- What do you need on a contractor timesheet before you’ll accept the hours? Project codes, task descriptions, weekly sign-off, all three probably.
- Where’s the line between configuring the system and training people on it? Training is expense under both rules, and it eats a surprising share of any ERP rollout.
KORE1 has a whole page on capitalizable contract development staffing, mostly about timesheets your controller can actually use. Worth reading before the auditor meeting, not after.
One more thing from Devin, because it’s the uncomfortable flip side. A contractor whose hours are operating expense and who has been sitting on your budget for years deserves a hard look. Not because contractors are bad. Because a seat that’s permanent in every way except the paperwork is usually a hire you haven’t made.
What Funded Initiatives Can You Not Push Into 2027?
Honestly? I’d start the whole budget here.
Every company has projects that already have a yes. The board approved it, the money’s earmarked, there’s an executive whose name is on it. Then the hiring budget gets tight and nobody can add headcount to actually do the thing. So it slides. Then it slides again. Then it’s March, the project manager you wanted took another job in January, and the go-live date the CEO mentioned at the holiday party is quietly becoming a Q3 thing that nobody wants to say out loud in the leadership meeting.
Some of them can’t slide. Windows Server 2016 reaches the end of extended support on January 12, 2027, per Microsoft’s lifecycle page. If you’ve still got boxes running it, that migration isn’t a 2027 wish. It’s a deadline, and it lands twelve days into the year. The ERP go-live you announced to the warehouse team. A compliance audit with a date on it.
Devin sent the KORE1 team a short list of questions about exactly this, and I’d steal all four for your own planning meeting.
- What technology initiatives are already funded that you can’t push into 2027?
- Where are you being asked to increase productivity without adding headcount?
- What projects have executive sponsorship even though hiring budgets are tight?
- What breaks if the company doesn’t spend the money or finish the project?
Number four gets attention. Every time. Make whoever owns each project answer it in one sentence with a dollar figure in it, because “it would be bad” is not an answer and “we’d miss $1.2 million in Q2 orders” absolutely is.
His point in that note was blunt, and I agree with it. A company that won’t approve three or four permanent hires will often approve the contract team it needs to finish a $300K or $500K initiative that already has funding. Different line, different conversation. KORE1 has priced out what a $500K initiative buys in contractors if you want a starting point.
How Does a Higher Cost of Capital Change the Mix?
The Fed raised its target range by a quarter point to 3.75% to 4.00% on September 16, 2026, on a 12 to 0 vote, according to the FOMC statement. Money got more expensive. Your board noticed. Your IT team probably didn’t.
Pricier capital pushes toward cost you can turn off. A permanent hire is a commitment with benefits, a recruiting fee, a ramp, and a severance conversation if the project dies. A contractor is a line that ends when the work ends, which is the whole appeal when the board is asking you to justify every dollar that doesn’t come back within the fiscal year. KORE1’s own placement records put the median contract assignment at 116 days across 1,887 placements, which lines up nicely with a two-quarter project.
It cuts both ways, too. 37.5% of KORE1’s contract placements convert to permanent hires (552 tracked), so a contract seat can also be how you test a hire before you commit to it. Offer to start is a median of three days across 1,997 placements, which matters when the project is already late.
None of that means contract everything. Please don’t. Run roles that never end are often cheaper as employees over a long enough stretch, and if you’ve had the same contract sysadmin for three years running, that’s not flexibility anymore. It’s a payroll decision you keep postponing. The point is to choose, line by line, instead of defaulting. There’s a longer piece on planning 2027 headcount at a higher cost of capital if your board wants the deeper version.
Where Does the IT Budget Template Fit?
That’s the thinking. The IT budget template is the file. It’s an Excel workbook with tabs for licenses, infrastructure, run support, projects, and contract labor, the contract seats already priced at the same index rates as the table here, and a CapEx flag on each line, with nothing counted as CapEx until you change it yourself and your auditor agrees.
Use both. Answer the funded-initiative questions first, sort every contract seat into run or project, then fill in the template. If you want the 2026 rates as a standalone reference, there’s a 2026 contract rate card to download too.
And if the real problem is that nobody owns IT strategy at all, that’s a different fix. Look at fractional CIO services before you budget another year of guessing.
Questions CFOs Ask Me in Budget Season
So can any of our contractor spend actually land on the balance sheet?
Possibly, if the contractor is doing development work on internal-use software and your auditor agrees the hours qualify. Run support like help desk and patching stays operating expense. Under ASU 2025-06, which applies to annual periods beginning after December 15, 2027, capitalization starts once funding is authorized and completion is probable, so get project codes on every timesheet before the work starts.
Realistically, what does a three-month contract project manager cost?
About $60,400 at the KORE1 median of $116 an hour, based on 40 hours a week for 13 weeks (KORE1 Contract Rate Index 2026-Q4, 21 placements, primarily Southern California). Six months is about $120,900.
Why is the bill rate so far above what the contractor takes home?
Burden first, then the firm’s costs. On a $100 an hour pay example, a 24% employer burden for payroll taxes, required insurance, and California sick pay brings the loaded cost to $124, and a bill rate around $150 to $160 covers that plus recruiting, account management, and margin. Ask any firm whether its quoted percentage sits on pay or on loaded cost.
Should the 2027 budget assume the new FASB rule?
Only if you’re adopting it early. ASU 2025-06 is mandatory for annual periods beginning after December 15, 2027, so a calendar-year company follows the existing project-stage model through 2027 unless it elects early adoption. That’s your auditor’s call. Ask in the planning meeting, not in March, because it changes which contractor hours your controller tracks and how.
Do we budget contractors at their salary or their bill rate?
Bill rate. Always. The invoice is what hits your P&L, and the bill rate already includes burden, insurance, and the firm’s costs, so budgeting at an imagined salary understates the line by a lot.
Start With the Seat List
Homework time. Before your next budget meeting, list every person who does IT work for you and isn’t on your payroll. Name, rate, start date, and run or project next to each one. I’d bet a donut at least one seat shows up that nobody remembers approving. Which, sure, sucks. But it’s cheaper to find in October.
Then hit me up on LinkedIn if the project side of the list scares you. If you already know which seats you need for 2027, talk to a KORE1 recruiter while there’s still time to start them in January.
Data as of November 2026. The KORE1 Contract Rate Index refreshes quarterly, and the California burden figures get rechecked after the Department of Labor’s final FUTA credit-reduction list on November 10, 2026.
