World-Class IT Organizations Spend 7%; Generate Strong ROI in Other SG&A Areas

World-class information technology (IT) organizations spend 7% more than typical companies, according to 2006 Enterprise Book of Numbers™ research from The Hackett Group. Hackett's research found that world-class IT organizations now spend $9,024 per end user while typical companies spend 7% less, or $8,485. World-class IT organizations are also investing 17% more on technology-enabled solutions than typical companies.

Where do these world-class organizations see the benefit IT? With the help of improved technology usage, world-class organization spend less on operations than typical companies:

  • World-class finance organizations spend 45% less. 
  • World-class procurement organizations also spend 25% less, 
  • World-class HR organizations spend 13% less.

Business Efficiencies: This increased spending in IT more than pays for itself by enabling improved efficiency and effectiveness in finance, procurement, human resources (HR), and other areas of back office operations. 

  • World-class finance organizations deliver 57% more invoices to customers electronically and in part as a result reduce billing errors by half and significantly lower Days Sales Outstanding, thereby increasing cash flow.
  • Staff at world-class procurement organizations process 36% more purchase orders per staff member than typical companies, and cut the cost per purchase order by nearly half.
  • World-class HR organizations clearly benefit from their increased focus on technology, with 13% lower HR costs per employee and 15% fewer HR staff. They fill manager positions 10% faster, and are more than 3 times as likely as typical companies to offer employees online access to health and welfare systems.

IT and Business Alignment: 

  • World-class CIOs are 48% more likely to be a member of their company's primary management committee.
  • In finance, world-class companies are 28% more likely to generate management reports from a centralized data repository, improving information access and offering an enterprise view of performance while reducing time spent searching for and cross-checking data from multiple sources.
  • World-class IT organizations use a project management office (PMO) to manage 90% of all projects, making them 130% more likely to do this than typical companies. 

Hackett's research found that 86% of all companies that achieve world-class performance in two or more business functions within Selling, General and Administrative (SG&A) areas are world-class in IT.

Hackett found a direct correlation between improved IT effectiveness and key value metrics in finance and procurement. In fact, Hackett found that in most cases, achieving world-class status in IT is a prerequisite to achieving superior performance in other back office functions. 

"Our research clearly shows how IT is the foundation for world-class performance across SG&A functions," said Hackett Senior Business Advisor Scott Holland. "While many companies continue to slash IT budgets, companies with world-class IT organizations understand that by selectively investing in IT they can drive down overall SG&A spending. At the same time, IT serves as an enabler of improved effectiveness in finance, procurement, and HR."

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