Costs & Benefits

Layer model of IT operating costs

by Rene Funke

Costs of IT operations are usually too large, inflexible and misallocated. Often it is a matter of selecting areas with low risks for operations or security - not jeopardising the business benefit.

According to our data lake, the central IT operation generates the bulk of the running costs, as expected, while the elastic layer as well as the budget for improvements are significantly narrower.

  • Improvement Layer "the brain" -  about 9%* of the IT operating cots: IT spend to improve technical progress
  • Elastic Layer "the lungs"- about 17%* of the IT operating cots: IT costs which can be reduced quickly if necessary
  • Elementary Layer " the core" - about 74%* of the IT operating cots: Minimum IT cost to keep the lights on

The layers of IT operating costs should be assessed taking into account the individual company or IT strategy. For example, cloud computing services are often more expensive, but offer companies with regular mergers and acquisitions and carve-outs the necessary flexibility to increase or reduce services and thus costs in the short term.

However, it is not appropriate to simply cut costs above the core - this narrows the scope for optimisation in the future and creates technical debt.

In benchmarks, the IT operating costs of a company can be assigned to the individual layers and viewed in peer comparison. This view is usually a valued contribution for additional transparency of IT towards its stakeholders.

*Source: Metrics Data Lake, April 2021; Average value in % of IT operating costs. Best in Class values can deviate significantly.

Rene Funke

Rene Funke

René Funke has held various manage­ment positions in the IT industry for over 20 years - with an excursion into the wonderful world of construction machinery. He is head of marketing and sales at Metrics.