Comparing Your IT Shop to Others

Benchmark the right way to gain useful insights.

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First, Find Firms and Organizations With Similar Characteristics

Similar firms are likely to be similar in terms of the expectations they have for and demand they place on IT—and thus IT in these firms provides a useful point of comparison. One way to think about this is as the "business context for IT"—which reflects characteristics that drive demand and expectation. These are not necessarily the ones you might expect and reflect (See Figure 1):

  • Cross-industry patterns indicate how IT is utilized. Forrester has found through research and client engagements that factors such as degree of centralization, commonality of business processes, and role of technology in the business model drive patterns of organization, governance and investment. Firms that share these behavioral characteristics are more likely to share similar IT spending and management practices. For example, a firm like Intel might compare its IT with Boeing.

  • Industry-specific segmentation is a less useful comparison. Some factors firms gravitate to are less useful for diagnostic benchmarking—with the most common one being industry. Surprisingly, this is only moderately predictive to how IT is utilized—firms may not neatly fit into an industry classification, and may operate very differently from one another—so that a firm like AIG might manage IT very differently from Metlife.

Figure 1: Business—IT factors that influence management practices

Context Possible Implications
Centralization of firm's business model In a decentralized firm, IT tends to be BU-aligned, with relationship-based planning and more flexible budgeting.
Diversity of firm's operational process In a firm with common operational processes, likely there is greater focus on end-to-end process automation with larger-scale projects.
Volatility of firm's customers/suppliers/partners/competitors Firms in markets with higher volatility tend to have higher-than-average IT expenditures with more dynamic planning and budgeting.
Role of technology in business model In firms where technology is central to business model, business plays greater role in IT planning and budgeting, with less year-to-year budget stability.
Firm's attitude toward IT expense (as investment or expense) Firms where IT expense is viewed more as an investment have greater focus on business case and sponsorship for IT expenditures.
Locus of technology decision-making (at exec level or business department level) In firms where significant technology decisions are primarily made at the exec level, greater emphasis is placed on strategic, enterprise-wide leverage of IT investments.
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