Great IT Performance Done Cheap

Four best practices from world-class CIOs.

How do you get more from less? A recent analysis of more than 2400 organizations defines a handful of best practices that can lead to better IT performance at a lower cost.

The Hackett Group, a research company that focuses on benchmarking, scrutinized the practices of its clientele, which includes 93 percent of the Dow Jones Industrials. Hackett distinguished the top IT organizations by tallying their effectiveness (quality and value) and efficiency (cost and productivity). "World-class" organizations (as defined by Hackett), while operating with 36 percent fewer staffers, provided higher levels of strategic value than did median IT groups, while spending 18 percent less overall ($US8686 per user for top organizations versus $US10,532 for the median).

Four best practices differentiated the world-class IT group: better use of outsourcing, simplification and standardization of IT systems, higher levels of process discipline, and better alignment with business goals.

Outsourcing lowers IT costs - but only if done selectively, says Beth Hayes, Hackett's IT practice leader. The top organizations spent 23 percent more on outsourcing than the median, but the differences go deeper. The top companies spent 60 percent more on outsourcing technology infrastructure activities, but 34 percent less on outsourcing application development and maintenance.

The reduced need to outsource application development projects is an outcome of the second best practice: simplification and standardization. Companies that have reduced the complexity of their systems can more easily manage application development. The Hackett data shows that world-class IT organizations had half as many ERP systems as the median group and 29 percent fewer applications per thousand users.

Process discipline is the third best practice for CIOs. In Hackett's study, 90 percent of the top organizations adhered to a common project methodology, compared with 56 percent of the median companies. Half of the top organizations managed IT projects through a permanent program management office versus a quarter of the median group.

The final best practice, better alignment with business goals, is impossible to measure exactly; Hackett used the proxy of executive relationships. All senior IT executives among the world-class IT organizations were members of their senior management committees, compared with 69 percent at the median companies. This seat at the table matters more than whether CIOs report to their CEOs, says Hayes.

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