Understanding how your IT is performing today, and being able to compare your performance against others, is a fundamental piece of knowledge required if you want to run your IT effectively.
ImprovIT has a range of benchmarking services designed to help you develop a detailed understanding of both your current performance and future potential. If your IT is in-house delivered, are your spend and staffing levels in-line with what you deliver? If your IT is outsourced, are you paying a fair market price for the services you receive? If your IT is a mix of in-house and outsourced is the mix correct? ImprovIT can help you calibrate precisely your current IT environment and identify latent potential.
In-house delivered IT
If your IT services are delivered by your own teams using in-house skills and technology assets, then one of the things you will be focused on is cost. Are you spending enough to get the results your business needs? Or are you spending too much? Maybe — like many — you overspend in some areas but underspend in others? In the 1880’s, Philadelphia department store giant John Wanamaker famously said that he knew half his marketing budget was wasted, but he didn’t know which half. Your IT budget will have more transparency than Mr Wanamaker’s marketing budget, but it’s still highly likely that you find it difficult to link IT investments with business outcomes, to know which areas are performing well and which need some additional focus.
While cost can be assessed in isolation (there are plenty of information sources around that will tell you the average spend on IT in your industry is n% of revenue) this invariably leads to confusion and can result in poor decision-making if the risks are not understood by the consumer of these “factoids”. Your IT cost is not especially closely linked to your industry, but your IT cost is closely linked to something….complexity. The more complex your IT environment, the costlier it is to run. We have a detailed methodology that allows us to calibrate your level of complexity and we can then compare you to other organisations with a highly similar level of complexity. Then, through a sophisticated process of gap analysis and causal assessment, we can determine how you compare, where you are strong, and what your options are for improving your performance and increasing the value you deliver.
Don’t confuse cost with price. If you are outsourced, your service provider is charging you a price for the delivery of your IT services. That price is not especially closely linked with the cost your service provider incurs to deliver those services to you. The price you pay is influenced by the type of outsourcing deal you have struck, its duration, the service levels you request and the penalties in place for any failure to hit agreed targets. Along with a whole host of other factors.
Benchmarking your outsourced deal is useful at various points throughout your contract. What was a good deal on day one is not necessarily a good deal in year two or three. But benchmarking is not just about checking the price you are paying, we can also help you assess the prices you are being offered as part of the proposal assessment phase of outsourcing. By leveraging our database of outsourcing contracts, we can help you identify the best deal for you. Don’t be fooled into simply taking the cheapest; the cheapest on day one is often not the best option when a lifetime view of the contract is taken.
Still today, at the heart of most outsourcing contracts is a commodity that is associated to a price. So, you may outsource ‘x thousand’ desktops and associated support services, or you may outsource a server estate of ‘y capacity’ with specific service requirements. The old adage that IT gets cheaper every year remains true at the commodity level; hardware and software consistently fall in price on a like-for-like basis. The only thing that gets more expensive every year is people. But taken as a whole, the total price of a commodity service(the hardware, software and people to support it) continues, on a unit cost basis, to decline each year. The only reason that budgets increase is that the rate or consumption outstrips the rate of price decay.
Even today, most people outsource IT for commodity reasons; the logic is that the service provider will have an economy of scale far higher that you can leverage and benefit from. In theory, they will also have plenty of highly skilled people and well defined processes and procedures so the quality of the service you receive will also go up. Of course, the primary reason for this type of outsourcing is to save money, so you will only sign the deal on day one if the price you pay is less than it would cost you to do it in-house.
But, understandably, the service provider needs to make money too. So the price you pay at the start will not reduce over time like the actual costs in the market decay. Indeed, the pricing schedule may have in-built increases and regular increments for any services deemed as “additional”. The reality for many is that over the life of an outsourcing deal they will save money in the early years and pay a higher price than average in the later years, so, checking you have a continued good price is critical as you progress through the life of the contract, because it will certainly change.
The bottom line is that, whatever your situation, it pays to check on how your IT function is doing. Is it delivering a good service for a fair cost (or price) or a combination of the two?
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