Industry Benchmarks Provide Context for IT Spend

The decision to establish a TBM program is often based on a desire to understand where an organization’s IT costs are going. What follows is an enlightening, fun, and sometimes tumultuous adventure to track down where the money is going in order to arrive at a more mature understanding of the spend profile throughout the organization.

What I’ve noticed when working in TBM programs is there is one question that will inevitably come up on this journey: Where does our IT spend on ‘x’ put us relative to our peers?

This is a really important question. There is tremendous value in understanding where your IT spend is going internally, but it’s also important to know your spend profile in context with your peers in the industry.

Benchmarking informs strategy

For the state of Washington, benchmarking informs our strategy and helps us understand our spend profile. The Office of the Chief Information Officer (OCIO) is a statewide office that establishes strategic direction for IT in state government. We administer a federated statewide TBM program that covers 45 agencies, representing approximately $1 billion in IT expenditures annually. Benchmarking is key to developing our strategic direction; in fact, incorporating industry benchmarks is written into the legislation establishing our office.

Being able to say how much the state is spending on applications and infrastructure allows us to better inform strategic direction on statewide IT investments. When we benchmark these expenditures relative to our peers in government and private industry, it helps us realize progress we are making towards our modernization goals. Benchmarking also helps us identify areas within our strategic plan that we may be underinvesting in today.

Benchmarking against internal peers too

Benchmarking isn’t always about looking outside of your organization. Unlike some states, Washington does not have a centralized IT organization, with one agency providing all IT services statewide. Rather, individual agencies have fully functioning IT departments responsible for meeting IT needs within their organization. For the most part, when it comes to IT needs to support agency business lines, the agencies handle the development and support of those services.

The OCIO is able to facilitate benchmarking opportunities across the state through our statewide TBM Program. All agencies within scope are responsible for allocating costs to the TBM Taxonomy. We utilize a single, centralized solution with full transparency. This allows agencies to compare their IT Resource Tower spend amongst themselves. Agencies can then put their own internal spend in context and compare to like-size agencies with similar business lines. As a result of this internal benchmarking, we’ve seen agencies make new strategic decisions, such as increasing investment in their security office by hiring a chief information security officer.

Internal benchmarking across departments creates an environment of “keeping up with the Joneses” that is actually beneficial. Agencies are constantly working to improve their business processes surrounding coding accuracy and mapping of expenditures to towers based on what they see their peers doing. This provides a direct benefit to the state as a whole by improving the quality of our data.

Defending our numbers

In state government, our business has to strive to serve all citizens. While having a 50% market share in the private sector is fantastic, in the government space, that would mean we are only serving half of our population.

In this environment, our services are subject to greater scrutiny to ensure we are meeting our obligations to citizens. By benchmarking the cost of our IT expenditures, we are able to provide justification for some of our citizen-facing services. Multiple agencies have partnered with the OCIO to utilize industry benchmarks to provide context for their IT spend numbers. These agencies are able to not only report out on where their expenditures are going, but also on how they stack up relative to their private sector peers.

The ability to illustrate efficiency in IT relative to the private sector is a great story for any government to be able to tell. It allows the agency to control the narrative relative to their expenditures and investment decisions. Benchmarking in this way is a cornerstone of data-driven decision making.

Compare, and compare often

While benchmarking has a natural annual cadence, we find value in benchmarking activities as frequently as every quarter. By engaging in comparisons more frequently, we are able to be strategic about where to invest next. Ultimately, benchmarking provides us with a powerful tool to ensure that we are asking the right questions.

Derek Puckett is the TBM Consultant for the OCIO TBM Program at the State of Washington, where among many other things, he is responsible for building out and improving the State’s TBM implementation and serves as the State’s expert TBMA.