Total cost to perform the process group "manage the business of IT", excluding depreciation/amortization, per $1,000 revenue

This measure calculates the total cost (excluding depreciation/amortization) per $1,000 revenue to perform the process group "manage the business of information technology," which defines and maintains the relevance of IT to the enterprise and its mission; communicates the strategy and role of IT within the enterprise; establishes the enterprise architecture and guiding principles; and manages the strategic activities which help ensure attainment of IT value. In this measure, capital expense only includes the cost for all capitalized items acquired during the reporting period as well as assets acquired in previous period that continue to be realized. The total cost is the sum of outsourced, overhead, personnel, system, and other costs. This measure is part of a set of Cost Effectiveness measures that help companies understand all cost expenditures related to the process "manage the business of information technology."

Benchmark Data

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Measure Category:
Cost Effectiveness
Measure Id:
105002
Total Sample Size:
852 All Companies
Performers:
25th
Median
75th
Key Performance
Indicator:
No

Compute this Measure

Units for this measure are Dollars.

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(Total annual IT cost (excluding depreciation/amortization) * Percentage of total IT cost (excluding depreciation/amortization) allocated to IT operating cost * Percentage of IT operating cost (excluding depreciation/amortization) dedicated to process group "manage the business of information technology" *.0001) / (Total business entity revenue * 0.0010)

Key Terms

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Process Cost Components

Total cost for a process, process group, or function consists of the following five components.

Internal/In-house operating cost consists of the first four components (personnel, systems, overhead, and other).

Personnel Cost

Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.

Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.

Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.

Systems Cost

Systems costs include all expenses, paid or incurred, in conjunction with:
Computer hardware or computer software acquired by the organization or provided to the organization through service contracts.

Any related costs to process, service and maintain computer hardware or computer software. The costs of providing and maintaining services for each applicable process (e.g., computer system(s) processing (CPU) time, network/system communication charges, maintenance costs for applications and data storage). This includes the costs related to LANs, WANs, etc. This does not include one-time costs for major new systems developments/replacements. Consultant fees should not be included in depreciation of new system implementations. Include only those costs that occur more than six (6) months after implementation, as normal system maintenance costs. Any systems cost (e.g., maintenance) which is outsourced to a third party supplier should be captured in the separate cost category labeled outsourced cost.

Systems cost should include all salaries, overtime, employee benefits, bonuses or fees paid to full-time, part-time or temporary employees or independent contractors who perform services relating to computer hardware, computer software, processing or systems support.

Overhead Costs

For the purpose of this study, provide the total actual overhead costs for the year related to the specified process. These are costs that cannot be identified as a direct cost of providing a product or a service. Include the primary allocated costs such as occupancy, facilities, utilities, maintenance costs, and other major costs allocated to the consuming departments. Exclude systems costs that are allocated, since these will be captured separately as systems cost.

Other Cost

Other costs are costs associated with the specified process, but not specifically covered in personnel cost, systems cost, overhead cost and outsourced cost in this questionnaire. These other costs include costs for supplies and office equipment, travel, training and seminars. Include the cost of telephones, except for that portion captured in systems cost.

External/Outsourced Cost

In determining outsourced cost, include the total cost of outsourcing all aspects of the specified process to a third-party supplier. Exclude one-time charges for any type of restructuring or reorganization. Outsourced costs should also include costs for intracompany outsourcing (i.e., reliance on a shared services center or other business entity).

Total Annual Revenue/Net Revenue

Total annual revenue is net proceeds generated from the sale of products or services. This should reflect the selling price less any allowances such as quantity, discounts, rebates and returns. If your business entity is a support unit and therefore does not directly generate revenue, then provide the revenue amount for the units you support. For government/non-profit organizations, please use your non-pass-through budget. For insurance companies the total annual revenue is the total amount of direct written premiums, excluding net investment income. Note: Business entity revenue needs to only include inter-company business segment revenue when the transactions between those business segments are intended to reflect an arm's length transfer price and would therefore meet the regulatory requirements for external revenue reporting.

Cost Effectiveness

Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.

Measure Scope

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Cross Industry (7.1.0)

  • 8.1.1 - Develop the enterprise IT strategy (10570) - Creating a strategy for the IT function. Build strategic IT intelligence. Recognize the current and future IT needs of the organization. Establish the guidelines and principles that support the IT function. Develop the architectural structure of IT function. Establish relationships with IT components suppliers. Define IT governance. Align IT objectives with the overall business objectives.
    • 8.1.1.1 - Build strategic intelligence (10603) - Developing strategic intelligence for IT. Develop a strategy that pertains to collecting, processing, analyzing, and disseminating intelligence in order to form an IT policy. Create a plan for a mission and vision for IT business within the organization.
    • 8.1.1.2 - Identify long-term IT needs of the enterprise in collaboration with stakeholders (10604) - Making the planning process for IT investments and decision making a quicker, more flexible, and more thoroughly aligned process. Recognize the organization's current and future information technology including computers, computer peripherals, trace route, DNS lookup, ping, routing tables, ARP tables, and interface statistics.
    • 8.1.1.3 - Define strategic standards, guidelines, and principles (10605) - Establishing the rules and regulations that will guide the IT function. Establish strategic standards regarding the organization's IT tools in order to share information about practices based on replicable, proven procedures.
    • 8.1.1.4 - Define and establish IT architecture and development standards (10606) - Establishing a process to develop methodical IT specifications, models, and guidelines.
    • 8.1.1.5 - Define strategic vendors for IT components (10607) - Establishing the suppliers of IT components. Create and maintain relationships with suppliers of IT components. Identify and assess the most cost-effective and efficient vendors.
    • 8.1.1.6 - Establish IT governance organization and processes (10608) - Creating and establishing an internal department that ensures the effective and efficient use of IT. Define IT demand governance to ensure the effective evaluation, selection, prioritization, and funding of competing IT investments. Oversee their implementation. Extract measurable business benefits.
    • 8.1.1.7 - Build strategic roadmap to develop IT capabilities in support of business objectives (10609) - Designing a strategic plan that specifies the goals and objectives of IT function and how it contributes to the overall business objectives. Align with the business objectives of the organization.
  • 8.1.2 - Define the enterprise architecture (10571) - Outlining the organization's IT architecture. Establish the IT architecture definition and framework. Create and confirm the approach for the maintenance of it. Ensure the relevance of it. Create the rules and regulations to guide the IT architecture. Act as the clearinghouse for all the IT research and innovation that takes place within the organization.
    • 8.1.2.1 - Establish the current and future enterprise architecture definition (10611) - Establishing the process to develop methodical IT specifications, models, and guidelines for the organization. Define a process specific to the needs and requirements of the organization. Assess the interrelationships of the business process architecture, the information architecture, the components and services architectures, and the infrastructure architectures to ensure their continued relevance.
    • 8.1.2.2 - Confirm enterprise architecture maintenance approach (10612) - Developing an approach for the maintenance of IT architecture.
    • 8.1.2.3 - Maintain the relevance of the enterprise architecture (10613) - Preserving the relevance of IT architecture. Ensure that the IT architecture is consistent with shifts and changes within the organizational framework and pertinent to the organization's overarching strategy.
    • 8.1.2.4 - Act as clearinghouse for IT research and innovation (10614) - Creating a centralized support structure that gathers, administers, and dispenses information relevant to new developments within IT research and innovation. Establish the IT function as the center through which all the information about the IT research and innovation can be collected, stored, and distributed. Enable the IT function to be the sole authority that takes care of all the technology information communication and settlement processes.
    • 8.1.2.5 - Govern the enterprise architecture (10615) - Administering the governance of IT architecture. Create and establish the rules, regulations, policies, and standards that will govern the individual components of the IT architecture, as well as the architecture in its entirety.
  • 8.1.3 - Manage the IT portfolio (10572) - Creating and establishing the portfolio by defining the projects, investments, and activities. Analyze and examine the value of the IT portfolio. Allocate resources toward it.
    • 8.1.3.1 - Establish the IT portfolio (10616) - Creating and establishing IT investments, projects, and activities (collectively known as the IT portfolio). Include planned IT initiatives and ongoing IT services (such as application support).
    • 8.1.3.2 - Analyze and evaluate the value of the IT portfolio for the enterprise (10617) - Examining and evaluating the value of the IT portfolio for the organization as a whole. Explore and interpret the value of the investments, projects, and activities of IT function by assigning it a quantifiable and qualitative value.
    • 8.1.3.3 - Provision resources in accordance with strategic priorities (10618) - Allocating financial and physical resources for the IT portfolio, keeping in consent with the overall strategic priorities of the IT function.
  • 8.1.4 - Perform IT research and innovation (10573) - Performing research and innovating effectively in order to improve the IT function. Perform a systematic investigation to find new IT services and solutions or to develop the existing ones. Upgrade and transform technologies that serve as the basis for the IT services and solutions.
    • 8.1.4.1 - Research technologies to innovate IT services and solutions (10620) - Systematically investigating and study materials and sources relevant to the IT function. Reach meaningful insights and conclusions in the form new ideas and innovation for the IT function.
    • 8.1.4.2 - Transition viable technologies for IT services and solutions development (10621) - Enhancing and improving the performance of IT services and solutions for the careful and routine transformation of the most feasible and practical technologies.
  • 8.1.5 - Evaluate and communicate IT business value and performance (10575) - Determining the business value of IT, and effectively conveying it to stakeholders. Establish key performance indicators of the overall performance of the IT plan. Communicate the determined value and performance of the IT function to stakeholders.
    • 8.1.5.1 - Establish and monitor key performance indicators (10625) - Evaluating IT factors that are crucial to the organization's success. Measure indicators such as IT costs as percentage of revenue, IT maintenance ratio, and system downtime.
    • 8.1.5.2 - Evaluate IT plan performance (10626) - Assessing the performance of the IT plan. Using the established performance indicators to measure the effectiveness and efficiency of the IT plan.
    • 8.1.5.3 - Communicate IT value (10627) - Conveying the value of IT to stakeholders. Use the evaluation of IT plan performance in order to determine the value of the IT function for the overall business objectives. Communicate the determined value of the plan to stakeholders including the shareholders, employees, and vendors.