The data-led insights offered by experienced benchmarking companies could be the answer for CIOs looking for help navigating an increasingly uncertain global economy. However, securing board buy-in can be a challenge. In this article, specialist benchmarking company ImprovIT describes how CIOs can use benchmarking to boost their organisation’s performance, while securing their own long-term goals.
Covid saw rapid digitalisation across every vertical as consumers looked for ways to conduct their lives virtually during lockdown. However, just as IT leaders began preparing for more sustained digital growth to cater to the new digital-first business landscape, the war in Ukraine sent shockwaves through many parts of the global supply chain and further disrupted an already fragile economy. With global inflation adding its own dark clouds to the gathering storm, CIOs must find some ballast to help them prepare for the uncertain waters that lie ahead.
Benchmarking is a widely used management technique that can offer independent and impartial comparative analysis and actionable recommendations, thereby assisting companies to remain competitive, especially in volatile circumstances.
One of the problems when getting boards to agree to benchmarking is that decision makers may have a slightly skewed idea of what it actually is. Some senior executives will have a tendency to use single metrics and call it a benchmark. However, corporate IT is a multi-layered world consisting of diverse technologies linked together, overlayed with a multitude of service levels and user support functions. To distil this into a single metric — IT spend as a percentage of revenue is a common one — is a bit like going on a diet and only taking your height as a measurement.
Complexity is a major driver of IT cost (and therefore price in an outsourced environment), and the more complex a given IT environment is, the more expensive it is to run and maintain. Some complexity is inherently necessary as a result of directly supporting valid business needs. As an example, while it may be technologically less complex (and therefore less costly) to support only half the number of branches, nobody would seriously suggest this as a sensible response to optimising IT costs.
Conversely, some complexity is a choice and not a response to business needs. Indeed, many such “choices” are made inadvertently or without a conscious decision being taken. Such complexity is usually the result of a series of decisions stretching out over an extended period of time, with incremental change piled on incremental change resulting in an almost imperceptible increase in complexity, the true effect of which is only felt over time. Such complexity adds no business value and simply serves to compound future technology costs.
Understanding this complexity, and properly contextualising it, is how meaningful benchmarking differentiates itself. From an IT benchmarking perspective, it is important to compare on the basis of similar complexity, and ImprovIT’s unique methodology allows the calculation of a “complexity index” for each environment being assessed; this index is then used as the primary criterion when selecting the comparative peer organisations.
ImprovIT starts by deconstructing the IT landscape into its constituent components; the entire technology landscape is segmented into a number of discrete technology areas, and for each area we have a codified model that defines the precise scope of that area in terms of the hardware and software elements, the roles and functions, and the services we expect to see within that area.
During the benchmark assessment we calculate a complexity index for each technology area. Thus, each area is compared to a carefully selected peer group of other samples. By then combining these peer groups together, we can build a composite model that exactly matches the IT function being analysed.
This approach goes far beyond the simplistic “one metric” approach used by many and provides a far more insightful and relevant set of findings.
By adopting a holistic approach rather than focusing on drastic measures like slashing costs and cutting staff, it is possible to devise an approach based on intelligent optimisation of available resources. Making the best of what you currently have is always a good first step; from there you can either address gaps through careful incremental adjustments or adjust services to enable the organisation to become more competitive.
In our experience, boards tend to be a lot more open to optimisation discussions. Far too often, traditional benchmarks will report that the company has underinvested in IT by a given percentage and the solution will be to throw more money at the problem. In reality, by providing a menu of potential solutions which focus on optimising departments and processes, companies could be getting more out of what they have before they begin looking at revising budgets – many of which are already under significant strain.
Benchmarking will continue to evolve — within our own organisation, we have developed a new offering, benchmarking as a service (BaaS). This provides our clients with the ability to update benchmarking data on a regular basis, receiving feedback through BI dashboards that will allow them to make small course adjustments throughout the year, and not only on an annual (retrospective) basis. BaaS will evolve into real-time benchmarking in the future.
For the astute CIO, benchmarking affords an opportunity to deliver real, measurable improvements. This not only ensures a more competitive and profitable company, but also showcases their value in an increasingly high-risk and volatile global economy.
The authors, Paul Michaels and Christopher Renn, are managing partners at ImprovIT Consulting
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