In a line-item budget, lights on is a descriptor for expenditures that are absolutely necessary for maintaining a company's critical business operations. Lights on differentiates a "need" from a "want."
In a data center budget, for example, lights on describes line items that are critical for keeping existing information technology (IT) operational activities going. Lights on, which includes electricity, cooling, equipment maintenance and software subscriptions, often accounts for the largest part of an IT budget.
Sometimes it can be difficult for a company to determine whether or not an IT upgrade is a lights on necessity. As a rule of thumb, if a vendor has publicly announced end of life (EoL) and has provided customers with documentation that it is removing a product, version or supported platform from the commercial market and will be discontinuing support, an upgrade can be considered a lights on expenditure.
The terms lights on and lights out are often used in financial writing to indicate whether or not a company is still in business. The implication, in this context, is that without the expenditure in question, the lights go out.
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