TotalCIO

May 31 2012   6:44PM GMT

Why IT spend as a percentage of revenue doesn’t work



Posted by: Christina Torode
Tags:
CIO
IT budgets
IT spend as a percentage of revenue
IT spending
run grow transform

Using IT spend as a percentage of revenue to figure out how to divvy up IT investments doesn’t work in many large companies. For one, most enterprises have varied business units and goals. One business unit might be in fast-growth mode and require more tech spending; another might be mature and held to a lower IT spend; and yet another might be going through a transformation project that requires a different spend. So picking a standard IT spend as a percentage of revenue for all of those units isn’t going to cut it.

And this pigeonhole of a metric certainly doesn’t reflect the ever-evolving and growing importance of IT investments in relation to a company’s ability to grow and compete. The run, grow, transform (RGT) model may be a better approach.

Read my CIO Matters column to see why Richard Hunter, vice president and Gartner fellow, recommends using a RGT model (and other more forward-looking metrics) for allocating IT spend, and learn about the real-life challenges CIOs encounter when using said RGT model.

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