It's not how much you spend on IT, but where you spend it.
Jon Surmacz for CIO
Leading companies spend roughly the same on IT as laggards, but they spend it
differently, according to a recent study.
The Hackett Group, an Atlanta-based consultancy, analyzed data from its 2000
clients (81 of which are Fortune 100 companies) and found that, on a
cost-per-end-user basis, most companies spend roughly $11,000 per end user.
However, world-class companies (those which Hackett identifies in the top
quartile of its measures for IT efficiency and effectiveness) spent 27 percent
more than average companies on systems and 20 percent less than average
companies on process costs. Typically, world-class companies spend 59 percent of
their total IT budget on basic infrastructure and operational support costs.
Average companies, meanwhile, spend about 69 percent of their budgets on basic
infrastructure and support.
Scott Holland, director of IT research for the Hackett Group, says world-class
companies have automated several back office functions, allowing them to spend
more money on strategic projects. "World-class companies really have the back
office nailed down," Holland says. "It's providing them with a competitive
advantage [over average companies]. The question for companies is, 'How can
technology make each end user more supportive to the business function?"
The difference between world-class and average companies starts at the top,
according to the Hackett research. World-class IT organizations spend 50 percent
of their time on strategic planning and decision making and only 25 percent of
their time handling support duties. That is nearly the reverse for average IT
organizations, which spend 46 percent of their time handling support duties and
only 29 percent of their time making strategic decisions.
Hackett research shows that with more time to spend on strategic planning and
more back-office automation, world class companies are able to spend 38 percent
less than average companies on finance transaction and process controls. They
are able to save 69 percent more than average companies on health and welfare
costs per employee because of the technology driven self-service capabilities
they've added.
Allan Frank, senior Hackett fellow, says another reason world-class companies
have gained such an advantage is their strict adherence to application
development and data standards. While 17 percent of average companies said they
have a high degree of data standards, 50 percent of world-class companies said
they maintain a high degree of data standards. Frank says standards will prove
even more critical as regulations such as Sarbanes-Oxley take effect.
"A year from now, it won't just be about cost and value," Frank says. "The CIO
and CFO have to come to grips with the integrity of their applications and
integrity of their data. Sarbanes-Oxley will have a serious impact on average
companies."
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