Despite stingy budgets, IT still finds ways to bolster business

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Improved automation means less spending on keeping the lights on

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Gains in automation and reliability are having an impact on how IT departments are spending their money, according to data from two independent sources.

The Hackett Group, a management consulting firm, says its benchmark data shows the cost of supporting one end user or employee in a business has fallen by about 17% over a 10-year period. That includes all the costs associated with the user, from PCs to applications, including business apps like ERP systems.

The most successful IT departments are devoting "substantially fewer" resources to run IT, said Hackett, freeing up money for new technological capabilities, functionality and services. For those departments, the 10-year cost reductions may be as high as 27%.

Improvements in automation, the use of cloud systems and CRM tools have allowed IT shops to focus more on building things for the business, said Mark Peacock, the IT transformation practice leader at Hackett.

This doesn't mean, in Hackett's analysis, that IT departments are spending less as a percentage of their budgets on IT staffing.

Another method for measuring IT spending changes is counting the number of users per IT staff member, something done by Computer Economics, a research and consulting firm. Over the past three years, this ratio has grown from 25 users per IT staffer to 35 users per staffer this year.

Hackett put the spending level on staffing in IT budgets at a relatively constant 38%. Computer Economics shows that personnel costs as a percentage of IT spending has declined, though not quite as far, from about 50% a decade ago to about 42% today, said John Longwell, vice president of research at Computer Economics.

Computer Economics sees IT organizations spending less on activities associated with keeping the lights on -- namely server, network and Web services support. IT operations are spending more on data management and end-user support personnel.

"Companies are spending more on applications and less on IT people today," said Longwell. "Overall, IT spending as a percentage of revenue is about the same today as it was prior to the recession. So while the IT staffing mix is changing and the IT spending mix is changing, it is hard to say whether IT is becoming more efficient per se," said Longwell.

"The real question is how much value is IT adding to the business," said Longwell. "Over the next few years, we think that will become increasingly evident -- that a lot of value is being added."

Adding value, said Erik Dorr, Hackett's vice president of research, depends on leadership. If the business wants a lot of customization, or doesn't shift to self-service, that will increase costs.

The ability of IT organizations to become world class "to a large extent comes down to the culture, capability and leadership," said Dorr," and "to what extent are organizations capable of driving out complexity and cost."

Overall, IT budgets are not growing rapidly, according to Gartner. It puts the typical annual increase at 2%.

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