Companies With ‘World-class’ Digital IT Spend 63% More on Emerging Technologies

MIAMI — Global organizations that implement digital enablement in IT are seeing their IT function increase productivity, reduce costs, and raise service levels, according to a report. 

The 2021 report, “Digital World-class Information Technology: Reaching New Heights in Peak Performance” by The Hackett Group, provides “empirical evidence that the hype behind digital transformation is real,” according to the company. 

The report details how “top performers” in digital IT improve their IT efficiency, effectiveness, and customer experience (CX) — as the organization also sees lower labor, outsourcing, and overhead costs and an increased bottom line.

Digital tools are allowing most IT teams to “fast forward” to new levels of “operational excellence and business value.” 

In terms of setup, the report finds that top performers in corporate IT are “overlaying digital technology on their existing systems, rather than embarking on large-scale infrastructure changes.”

“Our data empirically shows that by investing in digital technology, companies not only save costs for the technology function, but for other G&A back-office functions, including finance, procurement, and HR, to the tune of 29%,” said Chris Key, senior director, The Hackett Group.

“In-fact, digital world-class organizations are spending even more (3%) versus average peer organizations in technology investment/innovation.”

Key findings from “Digital World-class Information Technology”

The Hackett Group’s report shows the following on top-performing companies in digital IT: 

Efficiency

• Operate at a 19% lower cost per end user 
• Are more productive, with 26% fewer full-time IT staff, 33% lower labor costs per end-user, and 41% lower outsourcing costs
• Achieve savings while spending 3% more on technology, including investing 36% more on software-as-a-service
• Invest less on mature or declining technologies and 63% more in emerging technologies, such as machine learning (ML), natural language processing (NLP), and blockchain

Effectiveness

• 3x more projects delivering targeted ROI
• 51% more business transactions automated
• 22% more IT service desk calls resolved on first contact

Customer Experience

• Are 63% more likely to be perceived as a valued business partner
• Receive 32% higher net-promoter scores
• See 2.1x greater levels of self-service through process automation

G&A Costs

• See an average 29% drop in costs associated with technology, labor, outsourcing, and overhead across all general and administrative (G&A) functions — including finance, procurement, and HR

Bottom-Line Impact

• Companies with at least one digital world-class business service function realize a five-year average increase in several key financial metrics: including net margin (85%); earnings before interest, taxes, depreciation and amortization (EBITDA) margin (18%); return on equity (90%); and shareholder return (53%)

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“Six Areas of Excellence”

1. Technology enablement: in IT

2. Data and analytics: Twice as likely to have formal enterprise data and analytics road maps

3. Cloud-based modern architecture: 36% more invested in cloud-hosted software per end-user; 31% higher allocation of technology spend to cloud; those with large-scale cloud deployments are 32% more likely to meet enterprise business objectives

4. Operating model evolution

5. End-to-end process design and ownership

6. Talent

Report methodology 

The Hackett Group’s report, “Digital World-Class Information Technology: Reaching New Heights in Peak Performance,” defines digital world-class IT organizations as those that achieve top-quartile performance in efficiency, effectiveness, and stakeholder experience across several weighted metrics in The Hackett Group’s comprehensive IT benchmark. 

The research is based on the company’s analysis of its results from IT benchmarks, performance studies, and advisory and digital transformation engagements with hundreds of global companies.

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