Cutter Consortium :: Getting Down to the Financial Basics of Business Technology

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Cutter Consortium helps companies leverage IT for competitive advantage and business success through its comprehensive range of consulting, training and content, provided by the leading expert practitioners in business and IT.

29 November 2005

GETTING DOWN TO THE FINANCIAL BASICS OF BUSINESS TECHNOLOGY

by Steve Andriole, Senior Consultant, Cutter Consortium

We're always complaining about the business technology "alignment" problem -- though my preference is to redefine it as a "convergence" issue. However you view it, it's time to revisit the ways to better integrate our business and technology planning and decision making. Let's focus on the financial basics.

One of the first steps necessary to assess the overall relationship between business and technology is to address the financial basics. Below are 10 questions that are important in determining the status of your business technology financial relationship. It amazes me how many of the companies I work with cannot answer these questions. If you can't answer these questions, there's no way alignment or convergence can occur.

The questions are:

How much money do you spend annually on all flavors of technology and technology support services?
What percentage of your gross revenue do you spend on technology (broadly defined)?
How much do you spend on technology per employee?
What are your direct competitors spending on technology?
What is the average spend (as a percentage of gross revenue) on technology in your industry?
What is the history of your technology spending? What are the trends (by major categories: hardware, software, services)?
What is the breakdown between "operational" and "strategic" technology? What are the trends?
How much of the technology budget is "discretionary" versus "nondiscretionary"?
What is the total cost of ownership (TCO) of your major spending categories (hardware, enterprise software, security, communications, etc.)?
How do you measure return on your technology investments?

These questions are necessary to baseline your technology spending in your company and in your industry.

-- Steve Andriole, Senior Consultant, Cutter Consortium

Getting Down to the Financial Basics of Business Technology

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Cutter Consortium, founded in 1986, is a global IT advisory firm helping organizations forge solutions to the business technology challenges they face. Through its research, consulting, and training, Cutter assists enterprises as they create, implement, and maintain IT systems and organizations that support business objectives and encourage innovation. Cutter pushes the thinking in the field by fostering debate and collaboration between thought leaders from different domains, countries, and disciplines. As a completely independent entity that has no special ties to vendors, Cutter Consortium is beholden to no one and dedicated to providing completely objective, unbiased information to its clients. Cutter Consortium gives you access to the top thinkers in IT.

Cutter Consortium, 37 Broadway, Suite 1, Arlington, MA 02474, USA. Phone: +1 781 648 8700, Fax: 781 648 8707