Worldwide IT Benchmark Report 2006: Introduction: Executive Summary

Transcription

1 Publication Date: Research ID Number: Worldwide IT Benchmark Report 2006: Introduction: Executive Summary Jed Rubin Dr. Howard Rubin Provides a high level overview of the findings from the 2006 edition of the Worldwide IT Benchmark Report, including key spending and staffing trends by industry and geography. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 TABLE OF CONTENTS 1.0 Overview of the Worldwide IT Benchmark Report Key Findings Demographics Overview of Outlook for IT Portfolio Trends: Spending IT Portfolio Trends: Staffing Conclusions...37 Publication Date: /ID Number: Page 2 of 38

3 Executive Summary 1.0 Overview of the Worldwide IT Benchmark Report Each year, the Worldwide IT Benchmark Report gathers critical IT data from organizations around the world, enabling you to compare the effectiveness of your IT spending and performance with that of your peers. The Summary of Findings highlights key, high-level results found in Gartner s annual Worldwide IT Benchmark Report. Beyond these high-level measures, the Worldwide IT Benchmark report tracks: Key spending and staffing measures by industry, highlighting full ranges of performance, not just averages, to enable organizations to identify their competitive position. Key cost and performance measures by technological domain: applications, data center, help desk, desktop/lan, voice, and data network. Measures include cost per desktop, cost per help desk call, FTEs per MIPS, etc. The Worldwide IT Benchmark Report is an indispensable tool for conducting internal performance assessments. It helps organizations identify opportunities to improve performance, align IT spending with industry best practices. The report that follows will provide an overview of the key findings of the 2006 Worldwide IT Benchmark report, detailing spending and staffing trends for leading organizations from around the world. 2.0 Key Findings IT spending for 2005 was cautious, and forecasts into 2006 are equally conservative. While at a macro level spending remains cautious, there are micro-climates of activity within industries and geographies. Indicators appear to show that spending behaviors are in line with business conditions for most organizations, while there are many organizations that are changing the economics of IT and the business. Outsourcing spending appears to have stabilized, with focus primarily on help desk, voice, and applications maintenance activities. Organizations are increasingly reinvesting performance optimization savings into supporting business growth and transformation. 3.0 Demographics This year s report surveyed companies from more than 30 countries in over 20 industry sectors to deliver five volumes of the most comprehensive and authoritative IT spending and performance Publication Date: /ID Number: Page 3 of 38

4 data in the industry. In addition to the historical database of more than 10,000 companies, this year s report highlights 2005/06 findings of over 1,800 companies. Distribution of Participants by Industry/Sector Graph here 2004 Participants: Distribution of Participants by Region Graph Here for Industry 2005 Participants: Indicate Qty Data for the Worldwide IT Benchmark Report is collected year round via Gartner s WWB Web site using surveys as well as via Gartner s own research and client engagements. Financial information such as gross revenue and income may also be collected from secondary sources such as annual reports. Demographics Graph here for region 2005 Participants: Indicate Qty 4.0 Overview of 2005 Despite originally optimistic forecasts of spending increases at the beginning of the year, many organizations have ramped back their initial spending plans. The initial outlook for 2005 spending called for an increase of around 4% across all industries current spending levels for 2005 indicate closer to 3%. Organizations operating in the energy, transportation, and manufacturing industries have all reduced IT spending in 2005 compare to spending levels last year. Industries that have seen the highest growth in IT spending include Professional Services Companies, Health Care, and Electronics. Publication Date: /ID Number: Page 4 of 38

5 Figure 1. Change in IT Spending by Industry/Sector: (organizations with more than $1B revenue) Energy Transportation Manufacturing Utilities Chemicals Retail Construction & Engineering Consumer Products Hospitality & Travel Telecommunications Metals/Natural Resources Information Technology Media Government Pharmaceuticals Education Food/Beverage Processing Banking & Financial Services Insurance Electronics Health Care Professional Services Database Average -2.9% -1.4% -1.3% -0.6% -0.2% -0.1% 0.0% 0.0% 0.0% 0.2% 0.8% 2.3% 2.8% 3.1% 5.0% 5.6% 6.0% 6.0% 7.1% 7.7% 8.3% 8.9% 10.1% -10% -5% 0% 5% 10% 15% When viewed regionally, Latin America and Asia Pacific have shown the strongest growth. North America has seen moderate growth and the Europe, Middle East, and Africa region (EMEA) have demonstrated nearly flat growth for Publication Date: /ID Number: Page 5 of 38

6 Figure 2. Change in IT Spending by Region: (organizations with more than $1B revenue) EMEA 0.4% North America 2.8% Asia Pacific 6.1% Latin America 7.5% 0% 1% 2% 3% 4% 5% 6% 7% 8% A common measure of IT intensity, IT spending as a percentage of revenue demonstrates that traditionally IT-intensive organizations continue to support similar investment levels: Banking & Financial Services Telecommunications and Professional services are among the top spenders. The Metals and Natural Resources, Construction & Engineering, and Food and Beverage Processing sectors continue to demonstrate lower IT spending levels. Regionally, the EMEA region continues to show higher IT penetration than the other geographies. Publication Date: /ID Number: Page 6 of 38

7 Figure 3. IT Spending as a Percentage of Revenue by Industry: 2005 (organizations with more than $1B revenue) Metals & Natural Resources Construction & Engineering Food & Beverage Processing Utilities Energy Retail Government Transportation Education Chemicals Consumer Products Media Hospitality & Travel Electronics Health Care Information Technology Pharmaceuticals & Medical Products Insurance Manufacturing Professional Services Telecommunications Banking & Financial Services Database Average 1.1% 1.8% 1.9% 1.9% 2.3% 2.3% 2.5% 2.6% 2.8% 2.9% 2.9% 3.0% 3.2% 3.4% 3.4% 3.8% 3.8% 3.9% 4.3% 3.6% 5.0% 5.1% 5.8% 0% 1% 2% 3% 4% 5% 6% 7% Publication Date: /ID Number: Page 7 of 38

8 Figure 4. IT Spending as a Percentage of Revenue by Region: 2005 (organizations with more than $1B revenue) Asia Pacific 2.9% Latin America 3.2% North America 3.5% EMEA 4.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Publication Date: /ID Number: Page 8 of 38

9 A frequently used measure of IT s support of its workforce, IT spending per employee shows a different picture of IT intensity. Again, here we see a concentration of financial institutions (banks, & financial services, insurance and telecommunications) at the high end of the spectrum, with education, metals and natural resources, and transportation at the lower end of the spectrum. By geography, again the EMEA region shows higher spending levels per employee. Figure 5. IT Spending per Employee by Industry/Sector: 2005 (organizations with more than $1B revenue) Education Metals & Natural Resources Transportation Hospitality & Travel Food & Beverage Processing Professional Services Retail Consumer Products Construction & Engineering Government Manufacturing Electronics Chemicals Media Information Technology Pharmaceuticals & Medical Products Utilities Health Care Energy Telecommunications Insurance Banking & Financial Services Database Average $2,187 $3,205 $3,915 $4,817 $5,150 $5,716 $5,978 $6,310 $6,687 $7,670 $8,540 $8,575 $8,669 $9,983 $10,325 $11,703 $14,079 $14,329 $16,687 $18,244 $20,143 $20,144 $11,131 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Publication Date: /ID Number: Page 9 of 38

10 Figure 6. Figure 6. IT Spending per Employee by Region: 2005 (organizations with more than $1B revenue) Latin America $5,677 Asia Pacific $7,229 North America $11,337 EMEA $12,003 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 Publication Date: /ID Number: Page 10 of 38

11 An additional view of relative IT investment demonstrates the role IT plays in the overall spending patterns of the business. IT plays a strong role in banks and financial services organizations, where IT is often viewed as a strategic enabler. However, in organizations where IT is viewed as a cost center, the penetration in the business operations is often lower: construction & engineering, retail and utilities are industries where this is often the case. Figure 7. IT Spending as a Percentage of Operational Expense by Industry/Sector: 2005 (organizations with greater than $1B annual revenue) Construction & Engineering Retail Utilities Food & Beverage Processing Consumer Products Metals & Natural Resources Government Hospitality & Travel Energy Transportation Chemicals Education Health Care Electronics Information Technology Media Manufacturing Insurance Pharmaceuticals & Medical Products Professional Services Telecommunications Banking & Financial Services Database Average 2.1% 2.5% 2.6% 2.8% 3.0% 3.1% 3.1% 3.2% 3.2% 3.2% 3.2% 3.4% 3.4% 4.5% 4.6% 4.7% 4.8% 4.8% 4.9% 5.2% 6.2% 7.5% 11.9% 0% 2% 4% 6% 8% 10% 12% 14% Publication Date: /ID Number: Page 11 of 38

12 Figure 8. IT Spending as a Percentage of Operational Expense by Region: 2005 (organizations with greater than $1B annual revenue) North America 5.1% Latin America 5.3% Asia Pacific 5.3% EMEA 5.6% 0% 1% 2% 3% 4% 5% 6% Publication Date: /ID Number: Page 12 of 38

13 With measures like IT spending as a percentage of revenue and IT spending as a percentage of operational expense, it is key to understand how the two components of the ration are moving relative to one another so an increasing IT spend year over year as a percentage of revenue does not necessarily indicate that spending is increasing; instead, it could indicate that IT spending is falling, but just not as fast as revenue is falling! To account for this, as well as to promote the need for year-over-year velocity benchmarking, Gartner has developed a series of agility measures to identify year-over-year change direction of key business measures (e.g., revenue, operational expense) versus key IT measures (e.g., IT spending) to map how an organization performs year over year, compared to its key competitors. This helps to answer questions about whether the business and IT are moving in the same direction. In the slides that follow, what we see are that in most cases in , IT and revenue and opex have grown at similar rates one of the exceptions includes energy, which saw increases in revenue and no operational expense growth on average (which translates into profitability) while at the same time IT spending decreased. This is likely due to rising fuel costs (driving up revenue) during a period of IT rationalization for the business. Figure Agility Metrics: Revenue Versus IT Spending Change (organizations with more than $1B revenue) IT costs increase as revenues decline: limited scalability? 25% IT spending in tune with revenue growth Banking & Financial Services Construction & Engineering Consumer Products Education Electronics Financial Services Food/Beverage Processing Government Retail Utilities Chemicals Revenue Manufacturing -25% Transportation Energy 25% Health Care Hospitality & Travel Information Technology Insurance Media Metals/Natural Resources Pharmaceuticals Professional Services Telecommunications IT spending in tune with revenue decline -25% IT Spend IT spend decreases as revenues increase: scalability or misalignment? Publication Date: /ID Number: Page 13 of 38

14 Figure Agility Metrics: Operational Expense Versus IT Spending Change (organizations with more than $1B revenue) IT costs increase as business expenses decline: IT leverage? 25% IT spending in tune with operational spending Banking & Financial Services Construction & Engineering Consumer Products Education Electronics Financial Services Food/Beverage Processing Government Chemicals Utilities Retail Opex Manufacturing -25% Energy Transportation 25% Health Care Hospitality & Travel Information Technology Insurance Media Metals/Natural Resources Pharmaceuticals Professional Services Telecommunications IT spending in tune with operational spending -25% IT Spend IT spend decreases as expenses increase: IT punishment? 5.0 Outlook for 2006 Optimization will continue to be a key theme in 2006 investment levels will continue to be relatively steady, at nearly 3%, with most notable increases planned for consumer products, electronics, and insurance. Largest reductions will be found within the retail and professional services industries. When viewed regionally, the relatively strong growth viewed in Latin America and Asia is forecast to diminish, while North American organizations appear slightly more optimistic about budget increases for the year to come. Publication Date: /ID Number: Page 14 of 38

15 Figure 11. Change in IT Budget by Industry/Sector: (organizations with more than $1B revenue) Retail Professional Services Transportation Hospitality & Travel Metals/Natural Resources Telecommunications Manufacturing Food/Beverage Processing Government Media Banking & Financial Services Utilities Pharmaceuticals Energy Education Health Care Information Technology Construction & Engineering Chemicals Insurance Electronics Consumer Products Database Average -4.9% -1.7% -0.2% 0.0% 0.0% 0.0% 1.2% 1.3% 2.4% 2.9% 3.1% 3.1% 3.3% 3.9% 4.1% 4.6% 4.7% 4.9% 5.1% 3.2% 6.5% 7.8% 7.9% -10% 0% 10% Figure 12. Change in IT Budget by Region: (organizations with more than $1B revenue) Publication Date: /ID Number: Page 15 of 38

16 Latin America 0.6% EMEA 1.8% Asia Pacific 3.0% North America 4.3% 0% 1% 2% 3% 4% 5% As a percentage of revenue, banks and financial services organizations will continue to invest the most in IT as a percentage of revenue, but slightly down from Metals and natural resources and food & beverage processing organizations are expected to remain at fairly steady levels. Publication Date: /ID Number: Page 16 of 38

17 Figure 13. Figure 13. IT Spending as a Percentage of Revenue by Industry: 2006 (organizations with more than $1B revenue) Metals & Natural Resources Food & Beverage Processing Construction & Engineering Utilities Retail Government Transportation Energy Hospitality & Travel Media Education Consumer Products Chemicals Health Care Electronics Information Technology Pharmaceuticals & Medical Products Manufacturing Insurance Professional Services Telecommunications Banking & Financial Services Database Average 1.0% 1.8% 1.9% 1.9% 2.0% 2.4% 2.5% 2.5% 2.6% 2.8% 2.9% 2.9% 2.9% 3.4% 3.4% 3.5% 3.7% 3.7% 4.1% 3.5% 4.7% 5.3% 5.4% 0% 1% 2% 3% 4% 5% 6% Education and metals and natural resources organizations will continue to invest the lowest per employee, while banking and financial services spend is expected to decline slightly for This is likely a result of continued business growth and new employee hiring, while IT costs remain scalable. Figure 14. Figure 14. Figure 14. IT Spending per Employee by Industry/Sector: 2006 (organizations with more than $1B revenue) Publication Date: /ID Number: Page 17 of 38

18 Education Metals & Natural Resources Transportation Hospitality & Travel Food & Beverage Processing Professional Services Retail Consumer Products Construction & Engineering Government Manufacturing Electronics Media Chemicals Information Technology Pharmaceuticals & Medical Products Health Care Utilities Energy Telecommunications Banking & Financial Services Insurance Database Average $2,166 $2,933 $3,633 $4,342 $4,614 $4,893 $5,291 $6,421 $6,432 $7,031 $8,263 $8,591 $9,016 $9,180 $9,922 $11,245 $10,708 $14,171 $14,429 $15,718 $17,391 $19,644 $20,718 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Education and metals and natural resources organizations will continue to invest the lowest per employee, while banking and financial services spend is expected to decline slightly for This is likely a result of continued business growth and new employee hiring, while IT costs remain scalable. Figure 15. IT Spending as a Percentage of Operational Expense by Industry/Sector: 2006 (organizations with more than $1B revenue) Publication Date: /ID Number: Page 18 of 38

19 Construction & Engineering Retail Food & Beverage Processing Utilities Hospitality & Travel Metals & Natural Resources Consumer Products Government Transportation Energy Chemicals Health Care Education Media Manufacturing Pharmaceuticals & Medical Products Insurance Information Technology Electronics Professional Services Telecommunications Banking & Financial Services Database Average 2.1% 2.2% 2.5% 2.5% 2.6% 2.9% 3.0% 3.0% 3.0% 3.3% 3.4% 3.5% 3.5% 4.0% 4.2% 4.7% 4.8% 5.1% 5.3% 5.6% 5.0% 7.5% 11.7% 0% 2% 4% 6% 8% 10% 12% 14% It is important to highlight that the movement in the spending as a percentage of revenue, per employee, and as a percent of business operational expenses are influenced by both the movement in IT and in revenue, change in number of employees, and increase or decrease in total operational expenses, so it is again valuable to look at the agility measures. While many organizations are expecting growth in both IT spending and Revenue for 2006, there are a number of exceptions. Organizations in the retail industry for example, is expecting growth and operating expenses, while IT spending declines which begs the question of will the business going to be sufficiently supported by IT to support the planned business growth? Publication Date: /ID Number: Page 19 of 38

20 Figure Agility Metrics: Revenue Versus IT Spending Change (organizations with more than $1B revenue) IT costs increase as revenues decline: limited scalability? 25% IT spending in tune with revenue growth Energy Banking & Financial Services Chemicals Construction & Engineering Consumer Products Education Electronics Financial Services Food/Beverage Processing Government Transportation Revenue Telecommunications -25% Professional 25% Services Retail Health Care Hospitality & Travel Information Technology Insurance Manufacturing Media Metals/Natural Resources Pharmaceuticals Utilities IT spending in tune with revenue decline -25% IT Spend IT spend decreases as revenues increase: scalability or misalignment? Figure Agility Metrics: Operational Expense Versus IT Spending Change (organizations with more than $1B revenue) Publication Date: /ID Number: Page 20 of 38

21 IT costs increase as business expenses decline: IT leverage? Electronics Information Technology 25% Energy Transportation IT spending in tune with operational spending Banking & Financial Services Chemicals Construction & Engineering Consumer Products Education Financial Services Food/Beverage Processing Government Health Care Hospitality & Travel Insurance Manufacturing Media Metals/Natural Resources Pharmaceuticals Telecommunications Utilities Opex -25% Professional 25% Services Retail IT spending in tune with operational spending -25% IT Spend IT spend decreases as expenses increase: IT punishment? 6.0 IT Portfolio Trends: Spending The following measures have been designed to show further resolution into the spending behaviors we have seen earlier. These measures include financial and strategic aspects, like spending distribution of capital versus operating expenses and spending on strategic themes (run, grow and transform-the-business spending), as well as more technical focused measures spending on hardware, software, outsourcing, and personnel, along with spending on various technology areas. One approach to understanding the investment plans for a business is to look at the operational versus capital expenses. Overall, IT capital investments have declined slightly since last year, but still demonstrating that organizations have continued to invest in new IT assets after an earlier period of limited investment. It is important to point out that strongest investment is currently found in the EMEA and Asia Pacific regions, while North America continues to remain more focused on operational aspects. Publication Date: /ID Number: Page 21 of 38

22 Figure 18. IT Operational Versus Capital Expenses: (organizations with more than $1B revenue) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 26% 25% 35% 32% 74% 75% 65% 68% Operational Capital Figure 19. IT Operational Versus Capital Expenses: by Region(organizations with more than $1B revenue) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 36% 37% 31% 30% 64% 63% 69% 70% Asia Pacific EMEA Latin America North America Operational Capital Exploring the distribution of spending between hardware, software, personnel, and outsourcing often provides some insight into what is driving some of the dynamics behind the investment Publication Date: /ID Number: Page 22 of 38

23 profile. Interestingly, there appears to be slightly lower investment in outsourcing as well as increased investment in Hardware, which would clearly have an impact on the capital and operational investment profile. Personnel costs make up the largest component of North American business operations but this is offset by relatively low investment in outsourcing. Outsourcing appears to be prevalent in the EMEA and Asia Pacific regions. Figure Distribution of Spending: Hardware, Software, Outsourcing, Personnel, Other 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15% 15% 13% 11% 10% 33% 34% 42% 37% 36% 19% 16% 11% 15% 20% 19% 17% 17% 16% 20% 15% 15% 15% 18% 21% Hardware Software Outsourcing Personnel Other Figure 21. Distribution of Spending by Region 2005: Hardware, Software, Outsourcing, Personnel, Other 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 8% 10% 15% 12% 22% 25% 18% 37% 25% 27% 22% 16% 24% 20% 19% 18% 21% 19% 25% 17% Asia Pacific EMEA Latin America North America Hardware Software Outsourcing Personnel Other Publication Date: /ID Number: Page 23 of 38

24 When viewed by technology domain, there appears to be a fairly steady investment pattern between infrastructure (help desk, data center, voice and data network, and desktop/lan) and applications activity for the last 2 years. Regionally, Asia Pacific and EMEA based organizations appear to be investing slightly more in applications new development work when compared to American operations. Figure 22. Distribution of Spending by Technology Area: (organizations with more than $1B revenue) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other 6% 3% 9% 8% Finance and Administration 7% 5% 5% 4% Application, Other N/A 4% 3% 4% Application Maintenance 16% 19% 17% 18% Application Development 15% 20% 18% 15% Help Desk 8% 5% 6% 5% Data Network 8% 8% 7% 11% Voice Network 7% 6% 7% 7% Desktop/LAN Server 16% 14% 11% 12% Data Center 17% 16% 18% 16% Publication Date: /ID Number: Page 24 of 38

25 Figure 23. Distribution of Spending by Technology Area: by Region (organizations with more than $1B revenue) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other 4% 13% 12% 7% Finance and Administration 5% 5% 3% 4% Application, Other 5% 6% 6% 3% Application Maintenance 18% 11% 18% 20% Application Development 18% 17% 11% 14% Help Desk 5% 6% 2% 5% Data Network 14% 10% 6% 11% Voice Network 7% 3% 9% 8% Desktop/LAN Server 11% 14% 11% 12% Data Center 13% 15% 22% 16% Asia Pacific EMEA Latin America North America Technology domains with the strongest amount of outsourcing activity include the voice and data networks and help desk support. There are multiple reasons why these activities are outsourced, including decisions around core strategic vs. non-strategic activities, the maturity of the offerings, and ability to engineer finances (e.g. outsourcing contracts may allow an organization to spread its spending out over several years rather than taking an initial hit for a new investment). Publication Date: /ID Number: Page 25 of 38

26 Figure 24. Percent of Spending on Outsourcing by Technology Area: 2005 (organizations with more than $1B revenue) Other Finance and Administration 1% 2% Application, Other 5% Application Development Data Center 13% 13% Desktop/LAN Server Application Maintenance 16% 16% Voice Network Help Desk Data Network 19% 20% 20% 0% 5% 10% 15% 20% 25% Exploring IT spending as it relates to the day to day operations of the business ( run the business ), the organic growth of the business ( grow the business ) and the launch of new products, services, or business models ( transform the business ) can be a very effective approach to determining business alignment and competitive gaps. If the business is expecting significant growth or transformation and that is not reflected in the IT budget, then that can indicate that the business has not planned its IT effectively or that the business is looking to get that support from somewhere else (e.g. outsourcing that is not managed by IT). This often highlights the role of an IT organization as a cost center rather than a strategic enabler. When comparing to peers, this can highlight potential competitive disadvantages. In general, IT spending on growth and transformation continue to increase, despite relatively flat IT spending highlighting continued optimization of run the business activity as well reinvestment in the growth and transformation of the business. The Asia Pacific region shows the highest concentration on growth and transformation, which is not surprising, considering the notable growth in IT spending observed in the region this year. Figure 25. IT Spending on Run, Grow, and Transform the Business: (represents organizations with more than $1B revenue) Publication Date: /ID Number: Page 26 of 38

27 100% 22% 12% 15% 14% 20% 75% 21% 20% 21% 23% 21% 50% 25% 57% 68% 64% 63% 59% 0% Run Grow Transform Figure 26. IT Spending on Run, Grow, and Transform the Business: by Region (represents organizations with more than $1B revenue) 100% 75% 20% 18% 29% 22% 4% 26% 12% 23% 50% 25% 51% 61% 71% 65% 0% Asia Pacific EMEA Latin America North America Run Grow Transform Another powerful way of highlighting IT s role in the business is a view of IT spending on key business processes. This way IT can help to facilitate conversations about how IT is consumed by the various business processes and begin to explore where optimization would have the most impact. Clearly different industries will have very different technology/business process footprints, but such a view can also be useful in identifying competitive gaps. Publication Date: /ID Number: Page 27 of 38

28 Figure 27. IT Spending on Business Function (as a percentage of total IT expenses, by business function) Banking & Financial Services Construction & Engineering Consumer Products Education Electronics Energy Food/Beverage Processing Government Healthcare Hospitality & Travel Information Technology Insurance Manufacturing Metals/Natural Resources Pharmaceuticals Professional Services Retail Telecommunications Transportation Utilities Database Average 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Production HR R&D Marketing Finance Inventory Management Customer Service Sales Support Other While spending increases are relatively moderate, there are some some areas of IT that have shown steady increase over the past years, these include security, business intelligence and web development. Areas of most notable decline are in consulting and voice spending. However, viewing these trends at a macro level may be misleading, often times there are microclimates of change occurring by industry and geography. Figure 28. Detailed Spending Priorities: 2004 (organizations with more than $1B revenue) Publication Date: /ID Number: Page 28 of 38

29 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% App Dev (web) App Dev Non Web App Mgmt Bus. Intelligence Consulting Hardware CRM Database DAM ecommerce eprocurement ERP Hosting Advisory Services Outsourcing Infrastructure Internet EAI Network Mgmt Network Operating Systems Portal Rich Content Security Storage SCM Sys Int Video Voice Web Content WAN Wireless Figure 29. Detailed Spending Priorities for 2005: Increase by Industry (colored areas represent where more than 50% of population is increasing spending in tech area) Publication Date: /ID Number: Page 29 of 38

30 Utilities Transportation Telecommunications Retail Professional Services Pharmaceuticals Metals/Natural Resources Media Manufacturing Insurance Information Technology Health Care Government Food & Beverage Processing Energy Electronics Education Consumer Products Construction & Engineering Banking & Financial Services App Dev (web) App Dev Non Web App Mgmt Biz Intelligence Consulting Hardware CRM Database DAM ecommerce eprocurement ERP Hosting Advisory Services Outsourcing Infrastructure Internet EAI Network Mgmt Network Operating Systems Portal Rich Content Security Storage SCM Sys Int Video Voice Web Content WAN Wireless Figure 30. Detailed Spending Priorities for 2005: Decrease by Industry (colored areas represent where more than 50% of population is decreasing spending in tech area) Publication Date: /ID Number: Page 30 of 38

31 Utilities Transportation Telecommunications Retail Professional Services Pharmaceuticals Metals/Natural Resources Media Manufacturing Insurance Information Technology Health Care Government Food & Beverage Processing Energy Electronics Education Consumer Products Construction & Engineering Banking & Financial Services App Dev (web) App Dev Non Web App Mgmt Biz Intelligence Consulting Hardware CRM Database DAM ecommerce eprocurement ERP Hosting Advisory Services Outsourcing Infrastructure Internet EAI Network Mgmt Network Operating Systems Portal Rich Content Security Storage SCM Sys Int Video Voice Web Content WAN Wireless 7.0 IT Portfolio Trends: Staffing While understanding the financial components of IT is often a primary focus of benchmarking, it is critical that organizations also take into consideration the human resources component of the IT portfolio staffing levels, productivity, education, motivation etc. The measures that follow are high level measures intended to provide a broad view of IT staffing levels. A key measure of IT support to the business is the percentage of IT employees compared to the total employees. As with other the ratios already discussed, financial institutions are typically among the most IT-intensive. These often align with those that are investing the most in IT as well, such as banks and financial services organizations. When we view the businesses regionally, we can see that North America continues to dedicate a relatively large amount of its human resources, followed by EMEA and Latin America. This view differs in terms of spending as a percentage of revenue and could reflect higher costs associated with human resources in the EMEA region. Publication Date: /ID Number: Page 31 of 38

32 Figure 31. IT Employees as a Percentage of Total Employees by Industry: 2005 (represents organizations with more than $1B revenue) Education Food/Beverage Processing Manufacturing Retail Consumer Products Metals/Natural Resources Chemicals Electronics Construction & Engineering Hospitality & Travel Professional Services Information Technology Pharmaceuticals Energy Government Media Utilities Transportation Telecommunications Banking & Financial Services Health Care Insurance Database Average 1.3% 1.7% 2.1% 2.1% 2.2% 2.3% 2.3% 2.4% 2.5% 3.5% 3.5% 3.7% 4.0% 4.1% 4.4% 5.2% 5.9% 5.9% 6.7% 7.4% 7.8% 4.9% 10.7% 0% 2% 4% 6% 8% 10% 12% Figure 32. IT Employees as a Percentage of Total Employees by Region: 2005 (organizations with more than $1B revenue) Publication Date: /ID Number: Page 32 of 38

33 Asia Pacific 2.8% Latin America 4.1% EMEA 4.7% North America 4.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% A view of how human resources are distributed across the technology domains can also highlight which activities are most labor intensive while spending on infrastructure and applications can often be similar, typically a greater number of staff are found within applications activities combining these ratios to IT staff as a percentage of revenue can provide guidance in terms of the relative staffing levels. Figure 33. Distribution of Staff by Technology Area: (organizations with more than $1B revenue) Publication Date: /ID Number: Page 33 of 38

34 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other 4% 4% 10% 8% Finance and Administration 5% 6% 6% 4% Application, Other 4% 2% 4% Application Maintenance 22% 22% 25% 23% Application Development 21% 22% 19% 18% Help Desk 14% 7% 6% 8% Data Network 8% 6% 5% 6% Voice Network 4% 4% 7% 4% Desktop/LAN Server 12% 14% 11% 12% Data Center 10% 11% 9% 13% Contractors can be an effective way of maintaining flexibility as business conditions are in flux, but maintaining contractors for extended periods of time can also be costly and limit process standardization. Chemicals, electronics, and metals and natural resource organizations are among the most dependent on external contractors. On a regional basis, Latin American organizations are most dependent on external contractors. Figure 34. Contractors as a Percentage of Total Staff by Industry: 2005 (represents organizations with more than $1B revenue) Publication Date: /ID Number: Page 34 of 38

35 Hospitality & Travel Consumer Products Media Professional Services Education Health Care Food/Beverage Processing Manufacturing Pharmaceuticals Telecommunications Energy Banking & Financial Services Government Utilities Insurance Retail Transportation Construction & Engineering Information Technology Metals/Natural Resources Electronics Chemicals Grand Total 10% 10% 10% 12% 13% 13% 16% 16% 17% 18% 18% 19% 20% 20% 21% 21% 21% 22% 22% 24% 25% 20% 30% $0 $0 $0 $0 $0 $0 $0 $0 Figure 35. Contractors as a Percentage of Total Staff by Region: 2005 (represents organizations with more than $1B revenue) Publication Date: /ID Number: Page 35 of 38

36 North America 17% EMEA 23% Asia Pacific 25% Latin America 30% 0% 5% 10% 15% 20% 25% 30% 35% Employee turnover is another measure that can help identify potential risks to the maintaining process consistency and effective IT service delivery. When an organization sees high employee turnover, there is a risk of losing process expertise and critical skillsets. When voluntary turnover is high, it can also indicate low employee satisfaction or a highly competitive marketplace. The Asia pacific region is experiencing relatively high turnover both on a voluntary and involuntary basis this suggests a competitive marketplace where IT skills are at a premium but also a fair amount of economic uncertainty. Europe is on the lower end of the spectrum on nonvoluntary turnover but still showing similar levels of voluntary turnover. Figure 36. IT Staff Turnover by Region: 2005 (represents organizations with more than $1B revenue) Publication Date: /ID Number: Page 36 of 38

37 16% 14% 12% 10% 8% 7% 7% 6% 7% 6% 6% 4% 2% 5% 5% 6% 3% 7% 0% Database Average North America Latin America Non-Voluntary Voluntary EMEA Asia Pacific 8.0 Conclusions The measures and benchmarks identified in this report provide a high-level view of current trends in IT of overall IT intensity, by industry and region, as well as trends in business alignment, staffing, technology, and outsourcing. These measures can be used to communicate with the business and to assist in setting internal goals as well. The findings in this report are intended to provide context for key business decisions and internal performance measures. It is important for organizations to understand that the averages are not intended to serve as targets, and decisions of good or bad performance based on these benchmarks should be discouraged. Rather, the benchmarks found in this research should serve as reference points that support current performance and investment levels and help identify critical differences that merit further analysis. For more detailed, industry-focused and technology-focused measures to monitor alignment, competitive position, and relative performance, organizations should consult the 2005 Worldwide IT Benchmark Report. For custom cuts of data, based on peers or similar organizations, a subscription to the Worldwide IT Benchmark Service is recommended. Contents of the 2005 Worldwide IT Benchmark Report Volume 1 IT Spending and Staffing Analysis Publication Date: /ID Number: Page 37 of 38

38 Overall data analysis, plus demographics, IT spending analysis by industry for over 20 industries, IT budgets versus business revenue, IT budget versus operating expense, budget change, IT staff-to-business staff ratios, IT spending per employee, income per employee, revenue per employee, and correlations between IT spending and business performance. Volume 2 IT Spending and Staffing Analysis: Multiyear Trends 5+ year measures along key financial and staffing measures across over 20 industries. Volume 3 Key Infrastructure and Application Metrics Spending and resource measurement data for help desks, data centers (Unix, Intel, mainframe), networks (voice/data), applications, and desktops/lans. Volume 4 Current Software Engineering Performance Results Key performance ratios for application development and maintenance. Volume 5 Current Software Engineering Performance Results: Multiyear Trends 5+ year trends along key application measures. Publication Date: /ID Number: Page 38 of 38