IT Budget as a % of Revenue

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CIO
I have the unique oppportunity to implement a world class IT organization at a company that has not tradionally invested in IT over many years. I read that comparing IT budget as a % of revenue is not as popular as it once was, and would like to know what the best comparisons to use: % of Opex or cost per employee, etc...?? Also, where would I find reasonable comparisons with my size company using the above metrics? 1300 employees; non-computer manufacturere; global company (25 key sites around the world) DLB
ASKED: October 22, 2007  1:57 PM
UPDATED: October 23, 2007  7:52 PM

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Hey DLB,

I can not state what is popular or not but this is the method we use. We create our budgets and then break them down into what percentage of our budget IT represents. You can then break those numbers down by percent per user and percent per machine.

As For Statistics you will have to pay for quality or you can google for some – but who knows how relible they will be.

Good Luck!

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  • Lightmike
    DLB, The problem with that ratio is it varies by industry as much as it varies with technology evolution. The discrepancy between insurance (1.5%) and manufacturing (5%) is reflective of the variance of the profit margins. Insurance companies have a smaller total operating expense, and a much smaller profit margin, per revenue dollar. The professional articles I have found on this subject are not reliable...What one company calls IT varies too (is it just the support staff, or all technology staff? which begs the question who do you label support vs technology?). I think a better metric is IT operating expense as a fraction of the total operational budget of the organization. Of course that varies widely by indistry as well as manufacturing requires capital that service organizations don't need. I think the better way to handle IT investment is to really understand both sides of the ROI and how the investment aligns with the organizational long range plans. If automation and process improvement with technology don't help the bottom line then maybe you shouldn't automate or improve process. It is easy to make an argument that a shift in IT investment may require more IT spend, but if the non-IT operational costs can be reduced by more dollars than the increas in IT spend, how can you deny the investment?
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