Has this ever happened to you?
It’s the 4th quarter and your budgets are nearing the final approval stage. You have endured endless challenges of why your budgets appear to be off from “industry averages.” Management wants to cut the IT budget, yet there has been no quantitative comparison to industry numbers.
What do you do?
Produce meaningful benchmarking data.
We’ve all been through such challenges. It’s as if you were being handed a knife to cut budgets to the bone. FP&A already had reached the conclusion on the IT budget using their benchmark data. After a few phone calls and Google searches, you find nothing close to a comparable model for the business. Why can’t there be data readily available for companies like ours?
Benchmarking can lead good outcomes to if you think of a benchmarking challenge as an opportunity presented by management. In the end, empirical data can be used to better manage your team. The results can also be liberating, as your current performance may be better than management thinks.
Where do you start?
First, getting access to the right external data is key. There are several services that can provide customized data for a cost. Alternatively, you may be in position to reach out to your peers in your industry who are battling the same challenge. Sharing non-confidential data with others can give you credibility with management as it is likely they are using those same competitors’ data to benchmark business results.
Second, getting your data in order may be problematic. It may be sufficient for financial reporting, but not detailed enough to compare to your IT spend. The information may be too consolidated or insufficient to determine spending at certain levels of detail or not available at all. You may need time to tag the data so that some historical information can be compiled. It is very important to get your peer group and your data aligned to consider industry, revenues, region, industry technology intensity, and business strategy.
Crunch the results and you may be pleasantly surprised that you lead in some categories while you lag in others. This honest assessment can provide quantitative results and may eliminate preconceived conclusions. It will also point out areas of success and where to focus improvement.
You may also want to consider engaging a third party to help you with this process. It is sometimes hard to remain objective when management is looking for cuts and IT is not perceived as a provider of strategic services to the business. An objective third party may be able to provide options from insights found in the data.
Answerport can help you with an objective perspective on benchmarking or other IT challenges you may have. Please send me an email with any questions or to share your experiences at: firstname.lastname@example.org.
About the author: Duane Breeden has served as a senior IT executive, most recently as the CIO and senior member of two companies’ executive teams over the past 15 years.