IT benchmarks: better integration of IT and business

 

IT benchmarks have been used for many years to systematically compare prices/costs and related services. The process involves working out deviations in order to identify certain patterns that help to assess the IT organisation. Over the time, IT benchmarking has evolved into a multi-purpose tool to determine, for example, the reliability and quality of IT systems and processes, or the market conformity of IT contracts.

At Metrics, we have been delivering IT benchmarking, IT sourcing and IT excellence projects for over two decades. In the first ten years, our clients focused on analysing internal IT costs (56.6 per cent). In contrast, market price benchmarking and sourcing support accounted for 29.1 per cent of projects in the early days, with customer satisfaction analyses, strategy consulting, workshops on KPI systems and service level analyses making up the remainder.

Benchmarking in IT Sourcing

Today, the situation has changed significantly: Firstly, there are more sourcing contracts; secondly, benchmarks show current market prices for IT services; and thirdly, well-designed sourcing contracts allow for regular review of contract deliverables in accordance with the benchmark clause. With a share of 30.2 per cent, sourcing projects are still a growing area. Together with market price benchmarks (39.1 per cent), they now account for more than two-thirds of all metrics projects. Only one in five benchmark projects still focuses on analysing internal IT.

 

 

Application areas for IT benchmarks

Cost control: A classic IT benchmark allows organisations to evaluate their IT costs against industry standards and competitors. By identifying areas where costs are higher than 'normal', organisations can optimise their IT spend in a targeted way. This helps to reduce unnecessary or excessive spending and improve profitability.

Resource utilisation: An IT cost benchmark enables organisations to determine whether their IT resources, such as hardware, software and personnel, are being used efficiently. By comparing performance metrics, IT organisations can identify bottlenecks and better allocate resources to increase productivity and reduce risk.

Decision-making: An IT benchmark provides organisations with critical data and insights to evaluate IT performance and make informed decisions. For example, management can better align IT strategy with business objectives.

Identify areas for improvement: By benchmarking against other organisations, areas for improvement can be identified. This includes inefficient processes, outdated technology or under-utilised resources. It can also involve comparisons with best practice approaches from other organisations and their return.

Portfolio optimisation: IT benchmarks provide valuable insights for optimising the IT portfolio. By comparing performance, costs and risks with industry standards, IT managers can make well-founded decisions on strategic alignment. Benchmarks also support planning by helping to identify and prepare for trends in the IT industry. An IT benchmark makes it possible to optimise the investment strategy and ensure long-term success because the portfolio meets the changing requirements of the market.

Risk mitigation: An IT benchmark helps to recognise and mitigate risks by identifying potential weaknesses in the IT infrastructure, for example. By using benchmarks to assess security and compliance practices, organisations ensure that they comply with applicable regulations and adequately protect their data and systems. This also includes vulnerabilities caused by insufficient staffing levels or inadequate service level agreements (SLAs).

Future proofing: An IT benchmark helps IT managers prepare for future challenges by identifying trends and developments in the IT industry. Benchmarks help organisations learn how technologies and best practices are changing to stay agile and adapt to change.

Customer focus: An IT benchmark enables IT organisations to better align their services and products with the needs and expectations of their customers and stakeholders. By using benchmarks to assess customer satisfaction scores and compare them with other organisations, they can ensure that their IT services meet customer requirements.

Cost allocation: IT benchmarks provide an objective basis for evaluating internal cost allocation. By comparing their internal costs and services to industry standards and benchmarks, organisations can provide auditors with evidence to assess the appropriateness of internal transfer pricing.

IT market price benchmarks: IT market price benchmarks provide companies with a basis for making informed decisions when procuring IT products and services. They evaluate competitive bids and achieve the best possible contractual performance for their money. In addition, IT market price benchmarks strengthen the negotiating position with suppliers, as price negotiations are conducted with real market information in order to negotiate more favourable contract terms. Overall, IT market price benchmarks help to make the best possible decisions when it comes to IT tenders or contract renewals.

Provider benchmarks: For an IT service provider, IT price benchmarks provide valuable insight into the market and competitive landscape. This enables suppliers to optimise the pricing of their products and services to deliver value to customers while remaining profitable. Ultimately, provider benchmarking enables suppliers to strengthen their negotiating position with customers and build long-term relationships by conducting price negotiations based on objective data.

Conclusion

IT benchmarking offers a variety of ways to improve the efficiency, profitability and competitiveness of an IT organisation and its IT procurement. Analysing IT performance helps to make informed decisions, identify areas for improvement and better prepare for future challenges. As the importance of IT to business success continues to grow, systematic IT benchmarking is a versatile management tool for aligning business needs with IT performance.