November 7, 2013

World-Class IT Orgs Dramatically Outperform Typical Companies at 15 Percent Less Cost

  • New Benchmark Research from The Hackett Group Identifies Four Key IT Strategy Elements That Top Orgs Use to Improve Effectiveness and Efficiency

MIAMI & LONDON, November 7, 2013 - World-class IT organizations achieve dramatically higher levels of effectiveness, meeting ROI expectations nearly twice as often, and support up to 80 percent higher levels of business process automation, all at 15 percent less cost than typical companies, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT).

The Hackett Group's research details how top-performing IT organizations focus on automation and complexity reduction as essential IT strategy elements. They are significantly more effective at providing IT enablement for key business operations, and operate with up to 80 percent less complexity. The research also spotlights four fundamental practices that differentiate world-class IT organizations from typical companies: alignment of IT metrics and formalized communication with the business; standardization of applications and IT processes; integration of end-to-end business processes; and the monitoring of business and IT outcomes.

The Hackett Group's research is based on an analysis of comprehensive benchmark studies performed at over 100 Global 1000 companies over the past few years. World-class IT organizations are those that achieve top-quartile performance across an array of more than 60 weighted efficiency and effectiveness metrics in The Hackett Group's IT benchmark.

"As companies grow, execute mergers and acquisitions, move into new markets, and expand their product portfolios, many naturally see increased complexity that can negatively impact performance. But this doesn't have to be the case," said John Reeves, Global IT Advisory Practice Leader for The Hackett Group. "The performance of world-class IT organizations demonstrates that it truly is possible to 'do more with less,' minimize cost, and deliver higher qualities of service."

The Hackett Group's research found that world-class IT organizations spend 15 percent less than typical companies per end-user, including 25 percent less on labor, 9 percent less on technology, and 8 percent less on outsourcing. Reduced complexity is a key element of how world-class IT organizations eliminate nonessential spending yet maximize staff productivity to drive down IT costs. Hackett Group's research found evidence of this across a wide array of IT metrics. World-class IT organizations carry 70 percent less complexity in their technology platforms. In addition, they rely on 40 percent fewer applications per 1,000 end-users. So as a result, hardware and software complexity levels are significantly reduced, with 30 percent lower software complexity and 60 percent lower hardware complexity.

At the same time, world-class IT organizations demonstrate dramatically higher levels of effectiveness. They meet ROI expectations nearly twice as often as typical, deliver against anticipated benefits nearly 80 percent more often, automate up to 80 percent more business processes, and deliver dramatically higher levels of self-service enablement.

Four Fundamental Practices of World-Class Companies

The analysis of The Hackett Group's 2013 benchmark data isolated four practices that are fundamental to world-class organizations' performance, but not widely adopted by typical companies.

Align IT Metrics and Formalize Communication with the Business - While most IT organizations track performance metrics, few typical companies have formal IT scorecards which provide a holistic view of IT performance and link metrics to IT strategy. This is standard practice at world-class IT organizations. World-class IT organizations use these scorecards to engage business leaders, demonstrate IT's contribution to the business, and spotlight where they need additional support or investment. This fosters a culture of continuous improvement. They also take a formal, structured approach to communication designed to foster quality interaction. Typical companies take a much more informal approach.

Standardize Applications and IT Processes - While most typical companies attempt to minimize customization through the use of a portfolio of "plain vanilla apps," world-class IT organizations focus on driving down the number of enterprise-wide solutions, creating a common enterprise platform that can then be customized to address the needs of different business units. Fewer applications result in a less complex IT environment, enabling world-class IT organizations to deliver new capabilities more quickly. An underlying set of common data definitions must also be in place before customization takes place.

In terms of IT methodology, The Hackett Group's research shows that limiting IT to a small number of project delivery methodologies is the most effective approach. Some projects may be sub-optimized, but adhering to fewer methodologies and setting clear process standards increases the consistency of project execution overall.

Integrate End-to-End Business Processes - From the earliest stages of project delivery, world-class IT organizations make integration considerations a high priority. This contrasts with typical companies, where the focus on application functionality takes precedence. But the higher levels of integration seen by world-class companies strengthens both IT and business performance. The importance of integration will only grow as companies look to improve the management and analysis of their data, and as IT organizations make greater use of cloud-based service providers.

Monitor Business and IT Outcomes - For the IT function to be successful, it has to work with the business to monitor IT and business outcomes. On the IT side, one of the most critical outcomes to monitor is attainment of architecture goals. To prevent IT architecture from becoming too complex, world-class organizations monitor portfolio-level architecture goals and metrics at a much higher rate than typical companies (75 percent of the time compared to 47 percent). World-class IT organizations also do a better job at holding IT staff and business owners accountable. While typical companies focus on establishing the right Key Performance Indicators (KPIs), world-class IT organizations also ensure that process owners are responsible for making certain that promised benefits are realized.

"The four practices we've identified in our research are truly things that any IT organization can address," said Erik Dorr, Senior Research Director, The Hackett Group."These are the fundamentals in the world-class IT playbook -- alignment, standardization, integration, and monitoring. Collectively, they allow IT functions to have much greater control over an expanding IT asset portfolio. Each practice is essential to efficient and effective IT performance. Together they function as a springboard to world-class execution."

The Hackett Group's Research Insights, "The World-Class IT Advantage Part 1: The Benefits of Pursuing IT Operational Excellence" and "The World-Class IT Advantage, Part 2: The Four Fundamental Practices of Top-Performing IT Organizations" are available to members of The Hackett Group Group's advisory programs.


About The Hackett Group, Inc.

The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle EPM and SAP practices.

The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 52% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm's benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group's clients and partners to achieve world-class performance.