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Hackett: World-Class IT organizations have dramatically increased focus on shared services and outsourcing

World-class IT organizations now report they have moved most of their technology portfolio to shared services, and spend significantly more than typical companies on outsourcing in key areas. World-class companies have seen a 168 percent increase in spending on outsourcing in infrastructure management and a more than 400 percent increase in spending on outsourcing in application management over the past three years.

"More than any other support function, IT has the potential to drive competitive business advantage. But at typical companies, IT is too busy just 'keeping the lights on.' Most CIOs appear to be simply ignoring business challenges in terms of the way they run their IT operations," said Hackett IT Research Leader David Hebert.

According to Hackett Senior Director, IT Research, Scott Holland: "World-class IT executives are making major changes, building a smarter, more skilled workforce of managers and professionals that can deliver business value. They are finding ways to control and reduce spending on routine operations, in part by moving transactional activities to outsourcers, and freeing up budget to increase capabilities in areas such as customer service, supporting new business models, and enabling interoperation within different parts of the business with end-to-end processes. In addition, the success they've had at providing real strategic advantage has in some cases helped them convince management committees to increase IT spending. Taken together, this is why we're seeing a reversal, with world-class IT organizations now spending more than their peers."

According to Hackett's research, world-class IT organizations now spend 10 percent more than typical companies on IT ($9,617 versus $8,715 per end user). World-class IT organizations now rely on 28 percent fewer staff than typical companies (26.5 versus 36.8 IT staffthousand end-users). However they show fully-loaded wage rates that are 32 percent higher ($119,383 versus $90,766IT staffer). This wage rate gap has grown dramatically over the past two years. At the same time, world-class companies are seeing turnover rates for professionals and managers that are 84 percent and 150 percent higher than typical companies, respectively.

In conjunction with these staffing changes, world-class IT organizations are also showing much more strategic use of sourcing alternatives than typical companies. World-class companies now dedicate nearly half of their infrastructure management process costs to outsourcing. World-class IT organizations spend $924end user in this area, 69 percent more than typical companies, and have increased their spending by 168 percent since 2002. In application management, world-class companies now dedicate more than 20 percent of their process costs to outsourcing. They spend $450end-user in this area, 91 percent more than typical companies, and have increased their spending by over 400 percent since 2002. In contrast, the combined outsourcing spend of typical companies in these areas has remained flat over the past three years.

World-class companies are also now making much greater use of shared services than typical companies, having moved nearly 90 percent of their technology portfolio to a shared services environment.