According to a Hackett Group study of over 2,100 organizations*, firms that spent “7% more per end user on information technology than typical companies,” but spent it wisely, profited from the higher investment with lower costs in other areas and greater effectiveness.
Hackett found that these companies shared five characteristics in their IT spending:
1. Standardization: they established one definition for each piece of data, consolidated systems, and standardized applications.
2. Analysis of returns: they do “precise risk/return of every major tech investment,…”
3. No blanket increase/decrease in IT budgets: they consider carefully which areas in IT need additional, or less, investment to support the needs of the business.
4. Align with businesses: “they align their information architectures directly with business initiatives,…”
5. Selective outsourcing: they use outsourcing to improve effectiveness, not to cut costs.
Are your competitors adopting these approaches to IT? If you see signs of smarter use of IT by a competitor, you should assess how its investment will affect the competitive balance between your organization and the rival.
* “Down To Business: Show That IT Matters, Don't Just Insist It Does
If you can't communicate the business value your organization is delivering, then maybe you're a commodity after all.”
Rob Preston, InformationWeek, June 4, 2007 issue