IT Benchmarking: Why Most Organisations Get It Wrong

 

A typical question in discussions with clients about IT benchmarking is: “Are we spending more on IT than our competitors?” Here’s the truth: IT benchmarking is not about cutting spend to the bone. In this article, we’ll break down what IT benchmarking really is, why it’s misunderstood, and how to use it to drive better outcomes.

What is IT benchmarking?

IT benchmarking is the process of comparing your IT performance, costs, and capability against peer organisations to identify opportunities for improvement.

This could include benchmarking:

• IT spend (e.g. as a % of revenue)
• Individual service towers (e.g. EUC, networks, mainframe)
• Outsourcing contracts
• Cybersecurity allocation
• Operating model efficiency

But here’s the catch: benchmarking only works when you compare like-for-like.
Comparing your spend to a generic “industry average” is rarely helpful - and often misleading.

The most common IT benchmarking mistake

The most widely misused metric in IT benchmarking is IT spend as a % of revenue.

It sounds useful. But if you’re targeting the bottom 25% of your industry, you’re often just racing to the bottom - at the expense of innovation, change delivery, and cybersecurity.

It’s also based on flawed assumptions:

• “Industry average” is too broad. Financial services could mean anything from a global investment bank to a closed-book insurer. Their IT needs - and risks - are entirely different.
• Low spend ≠ good performance. Especially when security threats, service coverage, and geographic spread are not accounted for.

That’s why the best IT benchmarks normalise for scope, volume, complexity, service level, and location - not just industry.

What should you benchmark beyond cost?

Too many executives fixate on cost reduction.
But some of the highest-impact benchmarking insights come from areas often overlooked - such as:

• Cybersecurity - Not just whether you’re spending enough, but whether you’re allocating it effectively across tools, people, and third parties. One recent CISO engagement used benchmarking to reveal underinvestment in the Security Operations Centre, despite an overall increase in spend.
• Business continuity - Are you under-invested in resilience and contingency planning?
• Service delivery models - Are you spending too much on legacy platforms or duplicated functions?

One Metrics client, for example, discovered they were over 25% above market price on their network services - despite initially being told they were spending “50% too much overall” by a separate consultancy.

A precise benchmark revealed the truth, and provided leverage for renegotiation.

When should you benchmark?

There’s no single right answer - but here are four high-impact moments to use IT benchmarking effectively:

1. During outsourcing or renewal

Benchmarking the Best and Final Offer makes sure your shortlisted proposals are genuinely competitive.
We often find one provider appears cheaper - but only because their proposal omits key services or over-prices resource units that will later proliferate.

2. Mid-contract health checks

Most good outsourcing contracts allow benchmarking every 2 years. It helps you:

• Validate value for money
• Re-align pricing if the market has changed
• Avoid full re-tenders when you’re otherwise happy with service

These clauses often work one way: if pricing is above market, providers must reduce it - but they can’t increase it if prices rise.
One Metrics client found that although their original deal had been competitive at the time, market shifts two years later left them 26.9% above the current benchmark - unlocking a contractually bound reduction.

3. Before cloud transitions

Cloud is not always cheaper.
Metrics data shows some clients spending 200% more post-migration - especially for 24/7 workloads.
Benchmarking before you move provides a reality check on cost, value, and suitability.

4. When value is unclear - especially after a rushed deal

In one case, a client single-sourced an outsourcing deal to keep up with business growth. Two years in, uncertainty around pricing was causing internal tension.

There had been no benchmark data during the initial deal - and the business needed objective analysis to determine whether to stay the course or change direction.

How IT benchmarking drives strategic alignment

IT benchmarking is more than an audit - it’s a strategic enabler.

• It frees up budget from inefficient areas to reinvest in transformation and innovation
• It removes endless “value for money” debates by grounding decisions in data
• It helps ensure your IT strategy supports - and enables - your business strategy

For example, one Metrics client used benchmarking to validate their current spend, despite executive pressure to cut.

Another used it to reshape their service model after discovering their outsourced contract was “cheap” - but completely unfit for purpose.

It also saves internal effort cycles.
When you have independent, normalised data, you don’t need to keep defending IT spend - or arguing the same points across finance, sourcing, and the board.
That frees leaders up to focus on outcomes, not noise.

Real-world examples: Benchmarking in action

Here are three common scenarios where benchmarking has made a real difference:

The CIO under pressure
After a strategic consultancy claimed the organisation was overspending by 50%, the CIO turned to Metrics.
Our benchmarking revealed the real picture: most significant overpricing was in networks (26.9%), minimal gaps elsewhere; nothing like 50%.
It saved face - and steered action.

The security spend question
A CISO wanted to ensure their increased budget was being spent effectively.
Benchmarking showed disproportionate spend in tooling, and underinvestment in SOC capabilities - helping redirect funds more strategically.

The rushed outsourcing deal
A fast-growing business had single-sourced a major outsource without benchmark data.
Two years in, they suspected it wasn’t value for money.
Our benchmark removed uncertainty - giving them the data to act with confidence.

Final thought: IT benchmarking isn't about being the cheapest

It’s about knowing where you stand - and where you can improve.

At Metrics, we help CIOs, Heads of IT, and procurement leaders benchmark intelligently - to support better decision-making, smarter sourcing, and stronger IT strategies.

If you're planning a major IT change, outsourcing review, or just want to understand whether you're getting value for money - benchmarking is the best place to start.

→ Ready to benchmark with confidence? Let’s talk