Leading global organizations are using a best practice for IT that advises managing personnel and strategies.
Posted Sep 28, 2005
World-class IT organizations are now spending 10 percent more than typical companies, and are doing a better job of staffing their IT departments, paying more for that talent, and delivering better strategic support than typical companies. These are some of the findings in the"2005 Book of Numbers" research report from The Hackett Group, a business process advisory firm.
The Hackett Group conducts best practice research, benchmarking, and advisory services to offer analysis and insight for companies. Their analysis is backed by metrics from 3,300 benchmark studies over the past 13 years at over 2,000 of the world's leading companies. The Hackett Group grades companies in multiple areas, such as IT, HR, or finance, on common metrics that measure both efficiency and effectiveness. Those companies that score in the top 25 percent for efficiency and the top 25 percent for effectiveness are considered world-class organizations. Typical companies are those who represent the average. The "2005 Book of Numbers" represents data compiled from the last 200 benchmarks completed over the last 2 years.
According to Hackett, this is the first time in recent years that world-class organizations have spent more than typical companies. This increased spending is being driven by world-class companies restructuring their workforces and enhancing the skill and experience level of their staff to improve their ability to deliver competitive advantage. Typical companies have made only modest improvements in these areas, according to the report. In addition, while typical companies have not increased their use of shared services and outsourcing, world-class companies have dramatically increased their focus in these areas. These companies have seen a 168 percent increase in spending on outsourcing in infrastructure management and a 400 percent increase in spending on outsourcing in application management over the past three years, according to the report. "Although world-class organizations continue to have less [IT] people than typical organizations, the average cost per individual is 32 percent higher in those world-class organizations. The leading organizations are spending a lot more money per person," says David Hebert, IT practices leader at The Hackett Group. "The result is, they have a higher-end workforce. They're taking advantage of outsourcing their low-end workforce and less-valued activities, such as application management. That leaves a workforce that is more focused on managing the important things, such as vendor management, IT project management and execution, strategy, and architecture."
The Hackett Group found other key areas are differentiating world-class companies from the rest of the pack, such as business alignment, or making sure that executives and senior management understand the importance of the IT department and its business processes. In addition, they're are doing a better job of reducing the number of redundant applications and customer databases. Typical companies, on average, have nearly three times as many databases as world-class organizations. Finally, world-class organizations are doing a better job of leveraging the technology they do install and making sure it satisfies the needs of the end users seeking to use it.
"More than any other support function, IT has the potential to drive competitive business advantage. But at typical companies, IT is too busy just 'keeping the lights on.' Most CIOs appear to be simply ignoring business challenges in terms of the way they run their IT operations," Hebert says. "On the flip side, world-class IT executives are making major changes and are building a smarter, more skilled workforce of managers and professionals that can deliver business value."
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