Pay More, Get More

World-class IT organizations spend 10 percent more than other companies, and have fully loaded IT wage rates that are 32 percent higher than their peers, according to 2005 Book of Numbers research from The Hackett Group, a business process advisory firm.

This is the first time in recent years that world-class IT organizations have spent more than typical companies. According to Hackett, the research data indicates this increased spending is being driven by world-class IT organizations restructuring their workforces, enhancing the skill and experience level of their staff to improve their ability to deliver competitive advantage and provide strategic support. Typical companies have made only modest improvements in these areas.

Hackett’s 2005 Book of Numbers also finds that while typical companies have not significantly increased their use of shared services and outsourcing, world-class IT organizations have dramatically increased their focus in these areas. World-class IT organizations now report they have moved most of their technology portfolio to shared services, and spend significantly more than typical companies on outsourcing in key areas. World-class companies have seen a 168-percent increase in spending on outsourcing in infrastructure management and a more than 400-percent increase in spending on outsourcing in application management over the past 3 years.

“More than any other support function, IT has the potential to drive competitive business advantage. But at typical companies, IT is too busy just keeping the lights on,” says Hackett IT Research Leader David Hebert. “Most CIOs appear to be simply ignoring business challenges in terms of the way they run their IT operations.”

According to Hackett’s research, world-class IT organizations now spend 10 percent more than typical companies on IT ($9,617 versus $8,715 per end user). World-class IT organizations now rely on 28 percent fewer staff than typical companies (26.5 versus 36.8 IT staff/thousand end users). However, they show fully loaded wage rates that are 32 percent higher ($119,383 versus $90,766/IT staffer). This wage rate gap has grown dramatically over the past 2 years. At the same time, world-class companies are seeing turnover rates for professionals and managers that are 84 percent and 150 percent higher than typical companies, respectively.