Comparing Your IT Shop to Others

Benchmark the right way to gain useful insights.

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Next, Compare Your IT Organization's Scope and Structure

When you have a basis of comparable enterprises, the next step is to see how your IT organization model compares. Areas to look at include whether there is a designated group for such functions as business relationship management, vendor management or IT marketing/communication, and how centralized or decentralized are functions like architecture, application development or project management. The approach and extent of IT outsourcing is another factor to look at. The reason for this IT organization comparison is to understand:

  • Do you have an appropriate IT structure and scope for your firm? Enterprises that tend toward centralized and common processes are best served by IT organizations that centralize functions like planning, resource management and architecture. Firms where technology is core to the firm's business model are more likely to have business-focused architecture and a stronger client relationship management group. By understanding the interdependencies between firm context and organization, you can tune your organization for improved effectiveness.

  • What management practices make sense for your organization model? It is not a given that every IT best practice makes sense for every organization. For example, project portfolio management is a recognized best practice for synchronizing business demand with IT capacity—but should be approached differently if application development is decentralized rather than centralized, or if business relationship managers are senior IT staff.

Then, Compare Budgets Based on Spending Objectives

IT organizations spend their funds on budget categories like staff, software and hardware, and outside services. But comparing what you versus other firms spend on staff without understanding what this staff is being used for provides data that is at best not actionable, and at worst may lead to unjustified actions. Instead, compare your budget allocations based on the purpose for the spending (see Figure 2):

  • Separate new investments and planning from ongoing costs. Firms make different decisions around spending on new business initiatives such as new CRM, or to support firm growth, than they do around ongoing operations and support; the former is discretionary, business-driven and very visible, whereas the latter is the result of past investments, existing business expectations and current IT practices. Similarly, spending on planning, enterprise architecture and innovation may reflect a conscious decision to position the firm's IT for future business needs or cost savings.

  • Dig into the context behind the budget numbers. Self-congratulation or blame based on a specific comparison may not be appropriate. For example, if your costs for end-user support are below the benchmark, you can assume that you are running this function fairly lean or your users are not well served. And if your spending for this was above the benchmark, you must evaluate if this is because your users are demanding more support, or if you are not using known practices to reduce this cost.

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