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What's the ideal IT spend relative to revenue?

This question does not make sense but unfortunately, too many senior non-IT executives still ask it and (perhaps masochistically) many CIOs inflict the question and answer upon themselves.

So it does need an answer of sorts. By all means ask it of operational (ie service provision/run) costs - better service for less cost is the continuous improvement agenda here for most organisations. But never ask it of investment projects - this has to be about focusing on benefit generation, return on investment and contribution to innovation, even when the projects themselves are primarily justified on cost savings rather than revenue enhancement or innovation.

Slightly tongue-in-cheek, here are some suggested actions for CIOs in this area:

  1. If the Board wants to know percentage IT spend/revenue as part of a set of measures to ensure IT service provision is cost-effective and service-improving, but looks for investment projects to be justified and governed on the basis of benefit delivery, return on investment and/or contribution to innovation, then the CIO is in a very good place
  2. If the Board wants to know percentage IT spend/revenue in connection with all IT-related spend (ie service provision AND investment project delivery), then the CIO either has a challenging executive education programme ahead or should perhaps be looking for the next career challenge
  3. If the CIO wants to know percentage IT spend/revenue in connection with all IT-related spend (ie service provision AND investment project delivery) in order to use it as a benchmark to share with the Board, then the Board may want to look for a new CIO!
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