The 5 Essential IT Benchmarks

for CIOs
Stop guessing if your budget makes sense | Ensure you’re not
underspending vs. peers | Identify areas of poor efficiency

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 Types of IT benchmarks

CIOs walk a tightrope, balancing the tension between fiscal responsibility, technology-enabled efficiency, and innovation-driven growth.
How much IT spend is too much, leading to waste? Too little, leading to business risk? Or just right, delivering the value your business
expects from technology investments?

There are three types of IT benchmarks, but CIOs and senior leadership leverage industry benchmarks to drive business alignment. This
paper focuses on the top five industry metrics that CIOs use to drive decisions and action.

Industry spend & labor IT financial OpEx Infrastructure cost & efficiency
(e.g., IT spend as a % of revenue) (e.g., software cost as a % of IT) (e.g., server unit cost)

Industry benchmarks provide an overview
of industry spend and labor efficiencies
(e.g., IT Spend as % of Revenue or IT
FTEs as a % of Total Employees). IT
leadership understands the role of IT and
allows them to demonstrate efficiency in
investment levels.
IT OpEx benchmarks provide
spend distributions across IT
resources (such as compute
spend) and financial categories
(such as software costs).
Infrastructure level benchmarks
provide spend distributions by
cost and efficiency (e.g., Unix/
Linux/Windows by total cost, unit
cost, or FTE efficiency).

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 A two-phase approach to IT benchmarking

1 2
Collect and align actual spend to benchmarks.
This is a time- and labor-intensive step because it requires
adapting a company’s costing approach to a normalized model for
comparison. A software-based solution can lighten this burden.
Interpret comparison and make decisions based on
learnings and insights.
A consultative advisory firm can help you understand what
to do in response to the comparisons.

Typical sources of IT benchmarking

Survey-based report Consultative advisory On-demand software

Gartner ISG, Rubin Worldwide, Deloitte, KPMG, McKinsey Apptio

Annually-updated metrics across Granular peer groups and precise Benchmark data anytime and self-
high-level grouping of industries, comparisons—which drive service peer group selections to drive
geographies, and size. recommendations. scenario planning in real-time.

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 Guiding principles for using high-level benchmarking metrics

Strategic decisions should be informed by metrics

The 5 essential IT benchmarks
Decisions shouldn’t be made in a vacuum—look for fact-based input. The
for CIOs
benchmark is a reference point. Being above or below the benchmark is
really not a bad thing—it’s just an input. Benchmarking improves our ability . IT spend as % of
to make comparisons and evaluate strategy. organization revenue
. IT spend as % of
Use industry high-level metrics in conjunction with each other
organization OpEx
One metric will not tell the whole story—and can be individually misleading. . OpEx % of IT spend
View metrics as a connected story, and rely on a repeatable benchmarking
cadence to capture changes in IT investment year-to-year.
. IT full-time equivalents as
% of employees
Analyze the relationship between benchmarking and business measures . IT spend by employee
Look at metrics holistically in the context of your business and technology
strategy. Understanding the relationship between metrics and key business
measures will lead to insights.

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1 IT spend as % of organization revenue
This metric informs the investment level of IT compared to business performance. Look at this metric in the context of other business
measures (e.g., role of technology, pace of change, and cyclical or external factors).

IT spend as % of org revenue changes relative to the point in the investment cycle. We have a tendency to view being over the benchmark
as bad, but there is a time lag between making investments (higher spend but flat revenue) and seeing the impact (higher spend and
increased revenue). It’s impossible to judge IT spend as % of org revenue without business cycle context.

Analyze your IT spend as % of organization revenue by asking:

. Are we investing enough / too much in the IT budget relative to business performance?
. Are we investing in IT to drive revenue growth and create new capabilities for the business?
. Are investments in IT being made ahead of expected growth?

How do you compare?

1.9%* Industry: Revenue: Region:

IT spend as % of org revenue Manufacturing, $10B+ Global
high tech

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2 IT spend as % of organization OpEx
While revenue fluctuates, OpEx is typically more consistent and controllable. This can be a great way to make comparisons for business strategy vs.
business performance. A larger investment in IT often demonstrates IT as a strategic differentiator.

Organizations look to decrease their OpEx spend as a result of investments in different technologies that improve operational efficiency.

Automation, artificial intelligence, and machine learning might cause increases in IT spend as % of org OpEx while reducing org OpEx as a % of total
company revenue. In other words, you might have to spend more on tech in order to spend less on overall operating expense.

Analyze your IT spend as % of organization OpEx by asking:

. Are investments in IT driving automation to reduce OpEx?
. Is IT a strategic differentiator for the business?
. Does our organization have large operating margins?

How do you compare?

1.7%* Industry: Revenue: Region:

IT spend as % of org OpEx Retail $1B-$10B EMEA

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3 OpEx % of IT spend
Articulate how IT investments support business goals. Technology should serve to provide business value—new value is generated from “change”
and “transform” growth activities that are typically tied to capital investment. A low CapEx% vs. OpEx% ratio may be a catalyst for executive
leadership to move funding from run to grow.

There is a caveat. Increasing the CapEx/OpEx ratio isn’t universally better: funding innovation isn’t exclusively the domain of CapEx. Cloud
adoption accelerates innovation and allows financial agility—all without the long-term CapEx commitment of owning assets.

Analyze your OpEx % of IT spend by asking:

. What is our IT investment level?
. Are we investing a healthy amount into change- and transform-the-business activities in IT?
. Are IT investments supporting desired business outcomes and capabilities?

How do you compare?

61%* Industry: Revenue: Region:

OpEx % of IT spend Information $1B-$10B North America
technology

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4 IT FTEs as % of organization employees
Validate whether your sourcing strategy receives an appropriate level of support and investment.

When IT is a strategic enabler for your business, it requires an appropriate amount of support: this comparison gauges the level of this support.

Analyze your IT FTEs as % of employees by asking:

. Do we have an appropriate level of IT staff?
. Do we provide an appropriate level of IT support?
. What is our IT labor sourcing strategy? (insourced, outsourced)

How do you compare?

3.7%* Industry: Revenue: Region:

IT FTEs as % of org employees Health care $250-500M Global
provider

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5 IT spend per organization employee
A high IT spend per employee for a smaller, more productive workforce can be seen as a positive versus a lower spend per employee for a larger,
less productive workforce.

Alternatively, it can demonstrate the need for additional headcount, especially after prolonged periods of low hiring. A highly-outsourced,
contracted, or ecosystem-based workforce easily skews this measure.

Analyze your IT spend per organization employee by asking:

. What is our IT investment level?
. Are we driving automation in the revenue-generating workforce?
. What is our labor staffing model?

How do you compare?

$27K* Industry: Revenue: Region:

IT spend per org employee Insurance $1B–$10B Latin America

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 Building trust in a benchmark comparison
The largest influencers on these metrics are industry, geography, and size of organization. You need benchmarks for your
relevant industry peers, in your region, and company size. A financial services company has a very different investment
profile than a retail company.

However, cross-industry comparison can be useful. A financial services company might find a comparison to a technology
company useful based on their shared digital business strategy.

Match the fidelity of the peer group to the business outcome that you’re seeking. If you need comparisons with finer detail,
engage with a consultative advisory partner to get a little bit deeper on the comparison

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 Look for benchmarks that offer diverse cohorts across these 3 dimensions:

Automotive Distribution, transportation, Information technology Metals & natural resources

Banking & finance & logistics Insurance Oil & gas
Biotech pharma & Education Investment banking Professional services
medical equipment Government & non-profit Manufacturing Retail
Chemicals Health care provider Manufacturing, high tech Telecommunications
Construction & Higher education Media Utilities
engineering Hospitality & travel
Consumer products

North America | Europe, Middle East & Africa | Asia Pacific | Latin America

$10B+ | $1B - $10B | $500M - $1B | $250M - $500M | Under $250M

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 How often to benchmark?
CIOs and IT leadership may only view the 5 essential IT benchmarks once or twice a year—the CIO might look to industry
benchmarks when the business and board have appetite for them.

But the other metrics, such as financial OpEx and infrastructure, can be viewed more frequently to identify areas for
improvement, set targets, and track progress.

For IT finance, one of the most challenging aspects of IT benchmarking is aligning their actuals to the benchmarks’ taxonomy.
We recommend an ongoing program for cost analytics and transparency where you consistently understand how your spend
aligns to a standard taxonomy used by benchmarks. This makes the process of aligning spend to benchmarks trivial as it’s
automated and continuously occurring.

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 Look for benchmarks that offer diverse cohorts across these 3 dimensions:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Your
actuals

Benchmarking
view

Peer data

Monthly upload of actuals Monthly review of actuals Biannual refresh of peer

aligned to standard to benchmarks benchmark data

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 Compare your costs. Know where you stand.

Always available On-demand SaaS benchmark reports

& up-to-date Fresh benchmark data every 6 months

Standard ATUM® taxonomy alignment

Defensible
comparisons Trusted benchmark data providers including
unique Apptio Community Data

Interactive
Customizable peer group
benchmark
data set Complete benchmark distribution detail

Integrated with Ability to drill into actuals to find variance drivers

actual monthly data Trending data to track progress over time

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 Get Started

Apptio’s products empower business leaders to drive optimal financial performance across their
organizations. More than 60 percent of Fortune 100 enterprises trust Apptio to manage spend
across the entire IT portfolio and beyond, so that they can focus on delivering innovation. Apptio
automatically ingests and intelligently structures vast amounts of enterprise and technology
specific spend and operational data and enables users across disciplines to report, analyze, plan,
and govern their investments collaboratively, efficiently and with confidence.

For more information,

please visit Apptio.com/get-started

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