There’s no magic IT spend benchmark … let’s stop looking!

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One of my CIO friends asked me this morning for the best overall benchmarks for IT spend. I told him the only measure I’ve seen consistently is IT spend as a percentage of revenue, which averages around 3% and varies by industry with retail at the low end and financial services at the high end. And I told him I didn’t like it …

He sent along a Gartner report he’d been reviewing with all kinds of potential benchmarks like spend per user device, spend per employee, IT headcount as a percentage of overall headcount, etc. As suspected, it also had the standard IT spend as a percentage of revenue, probably more accurate than my ballpark at 4% and with all the usual breakdowns by industry.

The report was interesting but didn’t change my opinion. I’ve never seen an overall measure I like for benchmarking IT spend to other companies. At the detailed level, benchmarks can be interesting for comparing things like help desk cost per employee or training cost per IT employee but overall benchmarks have too many variables to be fair comparisons. Not only are industries very different, company size and age influence spend as well. Additionally, companies use IT in different ways strategically and should invest based on their strategy.

Theoretically, benchmarks could be useful to back up more internally focused analysis, but I haven’t even found them particularly helpful in that regard. We’ve used benchmarks to try to convince CFOs that they need to invest to stay competitive, and they usually just argue that their company isn’t comparable to their industry or competition. These benchmarks could be used to make a case for cutting spend, but most executives don’t need extra analysis to be convinced of that strategy anyway.

So my vote is to stop looking externally for an easy answer, and instead focus on improving the measures in house based on the company’s strategic objectives.

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