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 February 1, 1998

Survey finds huge gaps on spending for info tech

DENVER — A recent Leading Trends in Information Services, Ninth Annual Survey of North American Chief Information Executives found a 1000 percent spending gap per employee on Information Technology, or IT, services between similar companies.

The study, released by Deloitte & Touche of Denver, also found that increased spending provides no added benefit for organizations’ bottom lines.

The study dramatically differs from previous research since it focuses on behavior profiles that drive IT spending and on analysis driven by outcomes-based measurement.

Findings demonstrate a wide divergence of IT behaviors and may serve as an impetus for a fundamental rethinking of how companies should invest in and manage IT. In the study, organizations are defined as high-spend or low-spend companies.

Lessons learned from the survey include:

* Keep it simple: Low-spend companies succeed in developing and enforcing a minimal number of technologies and platforms to rein in costly redundances. They use 24 percent fewer telecommunications technologies and 22 percent fewer software technologies than high-spend companies. Low-spend companies also avoid the temptation of investing in “faddish” new technologies, spending an average of 55 percent less than their high-spend counterparts. The resulting simplicity leads to lower employee turnover rates.

* Buy, don’t build: Low-spend companies are better at leveraging off-the-shelf software solutions, rather than choosing costlier custom development. In companies with revenues of $5 billion or more, 68 percent of low-spend companies opt for packaged applications, compared with 41 percent of high-spend companies.

* Teach them well: Low-spend companies allocate almost twice as much of their budget to training as do high-spend companies. With only slightly higher turnover rates, low-spend companies are likely to spend more than four times as much on recruitment (5.2 percent of allocation versus 1.2 percent).

* Outsourcing not a silver bullet: In every outsourcing category, high-spend companies outsource a higher percentage of their IT environment — in some cases two to three times as much — as low-spend companies. And the results of outsourcing have been disappointing. There is a significant gap between expected and actual results of outsourcing.

* Business first, IT second: Low-spend companies look first at business objectives and then determine how particular technologies can help fulfill those objectives. High-spend companies, by contrast, rank Internet/Intranet integration as the third most important objective indicating that these companies seem to deploy technologies before assessing the larger business need, resulting in more complex and inefficient environments.

The study surveyed chief information officers of nearly 500 corporations from a broad range of industries to determine the issues they face and the resources allocated to address these issues.

The study also measured other factors, such as expenditures on an operating-cost-per-employee basis that puts companies of all sizes and industries on a comparative basis.

DENVER — A recent Leading Trends in Information Services, Ninth Annual Survey of North American Chief Information Executives found a 1000 percent spending gap per employee on Information Technology, or IT, services between similar companies.

The study, released by Deloitte & Touche of Denver, also found that increased spending provides no added benefit for organizations’ bottom lines.

The study dramatically differs from previous research since it focuses on behavior profiles that drive IT spending and on analysis driven by outcomes-based measurement.

Findings demonstrate a wide divergence of…

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