Information Technology Assessment
Spending Benchmarks
A firm's information workforce (defined as executives, management,
administrators, clerical and sales personnel) is the primary consumer
of information technologies. Therefore, the tracking and benchmarking
of critical information workforce ratios and trends must precede all
analyses of I.T. spending. Generally, I.T. budget growth should
exceed workforce growth only if there is a corresponding increase in
Information Productivity.
| Critical Indicator |
1997 |
1998 |
1999 est. |
2000 est. |
1997-2000
change |
Information Workforce /
Total Workforce |
19.25% |
19.62% |
19.57% |
19.57% |
2.02% |
IS Employees /
Information Workforce |
5.48% |
5.73% |
5.72% |
5.72% |
4.43% |
IT Budget /
Information Workforce |
$4,437 |
$4,669 |
$5,492 |
$5,517 |
24.36% |
Information Productivity Growth May Indicate I.T. Effectiveness
If Information Productivity growth is favorable and exceeds I.T.
spending growth, it may suggest increased effectiveness in of computer
applications. Such cause-effect claims must be further confirmed by
verification of I.T. investment payoffs from individual projects.
| Critical Indicator |
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1993-1998
change |
| Information Productivity |
3.16% |
2.70% |
7.13% |
0.75% |
7.14% |
8.98% |
184.01% |
I.T /
Information Workforce |
$3,769 |
$5,609 |
$4,783 |
$4,262 |
$4,437 |
$4,669 |
23.90% |
I.T. Cost Migration
As I.T. costs migrate from what is classified as costs under corporate
control into expenses incurred directly or indirectly by business
operations, an assessment of estimated full corporate I.T. costs gains
in importance.
|
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
Nominal Corporate-wide
IT Budget |
$30,376 |
$31,701 |
$40,551 |
$36,536 |
$36,465 |
$36,635 |
$43,800 |
$44,000 |
IT Expenses
excluding ISD |
5.51% |
5.51% |
5.51% |
5.51% |
5.34% |
5.41% |
4.57% |
4.55% |
IT Users
excluding ISD |
2,457 |
1,823 |
3,758 |
4,975 |
6,002 |
6,071 |
6,263 |
6,464 |
IT hrs spent
by users/month |
5.74 |
5.74 |
5.74 |
5.74 |
5.74 |
5.74 |
5.74 |
5.74 |
Estimated Full
I.T. Costs |
$40,511 |
$39,725 |
$55,727 |
$55,683 |
$59,084 |
$60,581 |
$67,370 |
$68,262 |
Investment vs Operating Expense
As I.T. organizations mature, an increasing share of available
resources is spent on on-going operations and maintenance expenses.
From the standpoint of corporate productivity, what matters most is
the amount of funds available for investment in business process
innovation. In superior organizations up to one third of funds should
be seen as a long-term investment rather than as an operating expense.
|
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
Estimated Full
IT Costs |
$40,511 |
$39,725 |
$55,727 |
$55,683 |
$59,084 |
$60,581 |
$67,370 |
$68,262 |
| Investments in New Developments |
$3,645 |
$3,804 |
$4,866 |
$4,384 |
$4,376 |
$8,280 |
$5,256 |
$5,280 |
| [Values in $000s] |
|---|
Investment /
Full I.T. Costs |
9.00% |
9.58% |
8.73% |
7.87% |
7.41% |
13.67% |
7.80% |
7.73% |
The Benchmark Spending Equation
A simplified equation for estimating benchmark I.T. spending has been
obtained from diagnostic studies of Strassmann, Inc. clients. Such
estimates are key to verification of reasonable levels of I.T.
spending.
| Benchmark I.T. Spending = |
Constant
+ A * S.G.&A.
+ B * PCs
+ C * Professionals.
+ D * Office Clericals
+ E * Profit After Taxes
- F * Officials & Managers
|
Benchmark Comparison
Comparison of benchmark with full I.T. spending is one of the
principal results of I.T. assessments. Such comparisons are
frequently required in presentation of long-range I.T. planning
proposals or submission of operating budgets.
| 1998 I.T. Costs |
$Million |
Margin of Error |
| Nominal I.T. Corporate Budget |
$37.6 |
Small |
| Full I.T. Spending |
$60.5 |
Possibly large |
| Benchmark I.T. Spending |
$57.6 |
+/- $4 million |
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assessment.
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