Benchmarking: a strategic advantage for CIOs in times of uncertainty
Data-driven insights offered by experienced benchmarking companies could be the answer for CIOs looking for help navigating an increasingly uncertain global economy. However, getting buy-in from the board can be a challenge. In this article, benchmarking company ImprovIT describes how CIOs can use benchmarking to improve their organization’s performance, while securing their own long-term goals.
Covid has seen rapid digitization across all verticals as consumers seek ways to live their lives virtually during lockdown. However, as IT leaders began to prepare for more sustained digital growth to respond to the new digitally driven business landscape, the war in Ukraine sent shockwaves through many links in the global supply chain and further disrupted an already fragile economy. As global inflation adds its own dark clouds to the brewing storm, CIOs must find ballast to help them prepare for the uncertain waters ahead.
Contact Léonie McManus for more information
Benchmarking is a widely used management technique that can offer independent, unbiased benchmarking and actionable recommendations, helping businesses stay competitive, especially in volatile circumstances.
It’s not a simple equation
One of the problems with getting boards to accept benchmarking is that decision makers may get a slightly skewed idea of what benchmarking really is. Some senior executives will tend to use single metrics and call them a benchmark. However, enterprise IT is a multi-tiered world made up of various interrelated technologies, layered on top of a multitude of service levels and user support functions. Distilling that into a single metric — IT spending as a percentage of revenue is common — is a bit like going on a diet and taking only your height as a measure.
Complexity is a major driver of IT cost (and therefore price in an outsourced environment), and the more complex a given IT environment, the more expensive it is to operate and maintain. Some complexity is inherently necessary due to the direct support of valid business needs. For example, while it may be technologically less complex (and therefore less expensive) to only support half the number of branches, no one would seriously suggest this as a sensible answer to optimizing IT costs.
Conversely, a certain complexity is a choice and not a response to business needs. Indeed, many of these “choices” are made inadvertently or without a conscious decision being made. Such complexity is usually the result of a series of decisions spanning a long period of time, with incremental changes stacked on top of incremental changes resulting in an almost imperceptible increase in complexity, the true effect of which is only felt. ‘over time. Such complexity adds no business value and simply serves to compound future technology costs.
Understand the complexity
Understanding this complexity and properly contextualizing it is what differentiates meaningful benchmarking. From an IT benchmarking perspective, it is important to compare on the basis of similar complexity, and ImprovIT’s unique methodology allows for the calculation of a “complexity index” for each environment being assessed; this index is then used as the main criterion when selecting comparable organisations.
ImprovIT begins by deconstructing the IT landscape into its constituent components; the entire technology landscape is segmented into a number of discrete technology domains, and for each domain we have a codified model that defines the precise scope of that domain in terms of hardware and software elements, roles and functions and of services that we expect to see in this area.
During the benchmark assessment, we calculate a complexity index for each technology area. Thus, each area is compared to a carefully selected peer group of other samples. By then combining these peer groups, we can build a composite model that exactly matches the computer function being analyzed.
This approach goes far beyond the simplistic “one metric” approach used by many and provides a much more insightful and relevant set of results.
It’s all about optimization
By adopting a holistic approach rather than focusing on drastic measures such as cost reduction and staff reduction, it is possible to design an approach based on intelligent optimization of available resources. Making the most of what you currently have is always a good first step; from there, you can either fill in the gaps with careful incremental adjustments, or adjust the services to allow the organization to become more competitive.
In our experience, boards tend to be much more open to discussions about optimization. All too often, traditional benchmarks will show that the company has underinvested in IT by a given percentage and the solution will be to spend more money on the problem. In fact, by offering a menu of potential solutions focused on optimizing departments and processes, companies could make the most of what they have before they start reviewing their budgets, many of which are already under pressure. important.
Real-time benchmarking is the future
Benchmarking will continue to evolve — within our own organization, we have developed a new offering, benchmarking as a service (BaaS). This provides our clients with the ability to regularly update benchmarking data, receiving feedback via BI dashboards that will allow them to make small price adjustments throughout the year, not just on a annual basis (retrospective). BaaS will evolve into real-time benchmarking in the future.
For the savvy CIO, benchmarking offers the opportunity to make real, measurable improvements. This not only ensures a more competitive and profitable business, but also enhances its value in an increasingly risky and volatile global economy.
Contact Léonie McManus for more information.
- The authors, Paul Michaels and Christopher Renn, are managing partners at ImprovIT Consulting