by Christopher Koch

Why IT Is Spending More

Apr 01, 20062 mins

1. Your product¿A high IT element in products (insurance and financial products, for example) usually means higher IT costs.

2. Business volatilityIf you are absorbing another company in an acquisition, your spending will be higher than normal.

3. Organizational structureA decentralized IT structure is more expensive to operate than a centralized one.

4. Competitive pressureIf your company focuses on using IT to add new business capabilities, your spending will be higher.

5. GeographyA global enterprise’s IT is more expensive than that of a local or regional company.

6. SizeSmaller companies tend to spend more on IT as a percent of revenue than larger companies in their industry. (Big companies tend to spend more per employee because they tend to be more complex.)

7. ComplexityHighly complex IT infrastructures (many different systems, many older systems) cost up to 50% more to maintain than low-complexity infrastructures (standardized, few applications).

8. Appetite for riskAggressive adopters of new technology may outspend mainstream adopters by 30% and risk-averse companies by 50%.

9. Service levels

High service levels (for mission-critical IT) cost more to maintain than low service levels.

10. Blip spendingUpgrading a system or refreshing all the old PCs across the company can raise costs temporarily.

11. Rogue spendingCompanies where IT is decentralized and business functions have the power to buy their own IT will spend more.

12. Revenue per employeeCompanies with high revenue per employee will tend to have more knowledge workers who use IT intensively, thus pushing up IT spending levels per employee.

Sources: Aberdeen Group, Forrester, Gartner