Total cost to perform the process group "develop and maintain information technology solutions", excluding depreciation/amortization, per $1,000 revenue

This measure calculates the total cost (excluding depreciation/amortization for assets acquired during current period) per $1,000 revenue to perform the process group "develop and maintain information technology solutions," which includes producing, developing and testing new, enhanced, and improved solutions; enabling services that meet all confirmed requirements; and setting solutions and discontinuing services no longer needed. 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 "develop and maintain information technology solutions."

Benchmark Data

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Measure Category:
Cost Effectiveness
Measure Id:
105005
Total Sample Size:
850 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 "develop and maintain information technology solutions" *.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)

  • 8.5.1 - Develop the IT development strategy (10587) - Creating and implementing a strategy for developing the IT function. Establish sources for IT development. Establish processes, methodologies, and tools. Select appropriate development tools and methodologies.
    • 8.5.1.1 - Establish sourcing strategy for IT development (10666) - Designing and establishing an institutional procurement process that defines the sources and ways that continuously improve and re-evaluate the IT services. Outline how specific vendors and suppliers will deliver the IT components and activities to develop the IT function.
    • 8.5.1.2 - Define development processes, methodologies, and tools standards (10667) - Establishing the methods, processes, and tools that will set the foundation for developing the IT development strategy. Define the new components, technologies, tools, and software for the development process.
    • 8.5.1.3 - Select development methodologies and tools (10668) - Identifying approaches and equipment for developing the IT function and choosing the most appropriate approach and tools. Analyze the pros and cons of various tools and methods on the basis of their cost effectiveness, development value, etc.
  • 8.5.2 - Perform IT services and solutions life cycle planning (10588) - Executing life-cycle planning for IT services and solutions. Develop new requirements and feature-function enhancements. Create and design a life cycle plan that takes care of the current and future state of IT services and solutions.
    • 8.5.2.1 - Plan development of new requirements (10669) - Identifying and establishing new requirements of IT function in order to develop the IT solutions. Plan for new tools and components required for the development of IT services and solutions.
    • 8.5.2.2 - Plan development of feature and functionality enhancement (10670) - Creating a plan or strategy for the development of the distinctive attributes and the activities performed by the IT services and solutions.
    • 8.5.2.3 - Develop life cycle plan for IT services and solutions (10671) - Creating and implementing a life-cycle plan for developing IT services and solutions. Make plans, projections, and decisions based on the life cycle of the IT services and solutions. Determine current and future IT requirements, performance, goals, and objectives.
  • 8.5.3 - Develop and maintain IT services and solutions architecture (10589) - Creating the architecture for the IT services and solutions. Revise as needed. Retire in case of inefficiencies.
    • 8.5.3.1 - Create IT services and solutions architecture (10672) - Designing and developing a complex or carefully designed structure that lays out the specifications, models, and guidelines concerning IT services and solutions.
    • 8.5.3.2 - Revise IT services and solutions architecture (10673) - Reconsidering and revamping the IT services and solutions architecture, which lays out the specifications, models, and guidelines concerning IT services and solutions.
    • 8.5.3.3 - Retire IT services and solutions architecture (10674) - Withdrawing the IT services and solutions architecture in case of inefficiencies.
  • 8.5.4 - Create IT services and solutions (10590) - Understanding customer requirements. Design the IT services and solutions based on the requirements. Develop components for providing the requirements. Train resources to provide support. Test the IT services and solutions in advance. Confirm the customer experience post-sale.
    • 8.5.4.1 - Understand confirmed requirements (10675) - Obtaining and comprehending the requirements for IT services and solutions in the market. Conduct market research to understand and analyze the possible market for the organization's IT services and solutions.
    • 8.5.4.2 - Design IT services and solutions (10676) - Designing specific applications of business and technical expertise. This will enable organizations in the creation, management, and optimization of, or access to, information and business processes.
    • 8.5.4.3 - Acquire/Develop IT service/solution components (10677) - Acquiring and creating the components needed for the provision and development of IT services and solutions. Design or acquire software, hardware, interfaces, servers, etc.
    • 8.5.4.4 - Train services and solutions resources (10678) - Preparing resources for the provision of IT services and solutions. Teach the skill or type of behavior through sustained practice and instruction to the employees who will provide the IT solutions and services.
    • 8.5.4.5 - Test IT services/solutions (10679) - Examining the developed IT services and solutions. Test the IT services and solutions in focus groups, etc.
    • 8.5.4.6 - Confirm customer acceptance (10680) - Analyzing the adoption of the IT services and solutions by customers, and confirming the customers' experiences met expectations. Use customer feedback, customer surveys, and customer reviews to effectively communicate and comprehend the experiences of the customers.
  • 8.5.5 - Maintain IT services and solutions (10591) - Updating and maintaining the requirements for IT services and solutions. Perform defect analysis, and design changes accordingly. Acquire or develop the components for changed IT services and solutions. Test changes. Retire the outdated and inefficient IT solutions and services.
    • 8.5.5.1 - Understand upkeep/enhance requirements and defect analysis (10681) - Comprehending the need to enhance the IT services and solutions by performing defect analysis. Update the requirements for IT services and solutions. Perform an analysis using defects as data for continuous quality improvement in IT services and solutions.
    • 8.5.5.2 - Design change to existing IT service/solution (10682) - Taking into account the updated requirements and design changes for the IT services and solutions.
    • 8.5.5.3 - Acquire/Develop changed IT service/solution component (10683) - Acquiring or creating components for changing IT services and solutions. Design or acquire updated software, hardware, interfaces, servers, etc.
    • 8.5.5.4 - Test IT service/solution change (10684) - Performing tests on a changed or updated IT services and solutions. Test the IT services and solutions by piloting solutions, creating trial runs, etc. to validate the impact of change. Ensure the IT function facilitates the required amount of support.
    • 8.5.5.5 - Retire solutions and services (10685) - Withdrawing inefficient and outdated IT solutions and services.