Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

IT Benchmarking


Published on

IT benchmarking (the comparison IT costs and IT prices) with market leaders or other companies of your industry or maybe a foreign sector can be a valuable management tool. Its effectiveness, though, depends on the quality of the reference data and a professionally conducted benchmark (reference model).

LEXTA is a leader in IT benchmarking and offers a deeper look into its practices and experiences in the field of IT benchmarkings.

Published in: Business, Technology
  • Be the first to comment

IT Benchmarking

  1. 1. © Copyright LEXTA GmbH 2016 This document is for use by authorised staff only. Distribution, citation, or copying – whether in whole or in parts – is prohibited without the written consent of LEXTA GmbH. The text and graphics included have been used as part of a presentation; they are not intended to offer a complete documentation of the event. Competence in IT Management IT Benchmarking January 2016
  2. 2. For technically-oriented benchmarking, LEXTA has access to current data from approx. 1,500 individual contracts containing approx. 50,000 price and cost items Company-Profile-LEXTA.pptx Slide 1Source: LEXTA IT BENCHMARKING METHODOLOGY IT Benchmarking Benchmarking strategies Procedure Results • Analysis of IT service scope, with demarcation of standard and non- standard service components • Determination of IT costs, with projection onto a standardised service scope for all IT services under consideration • Analysis of IT costs • Determination of business-related KPIs, e.g.: – IT costs vs. sales or as a share of overall costs – IT costs per user / employee – IT costs per subscriber, etc. • Comprehensive statement on the gap between the IT service providers with excellent cost / performance positions (lessons learned) • Reliable identification of levers and approaches for the optimisation of costs with an estimation of potential • Business- and cost-related IT KPIs for industry-specific trend comparisons • Indicator of customary market practice for user requirements • Limited consideration of quality standards, functional scope and company-specific characteristics Business- oriented benchmarking Technically- oriented benchmarking IT Benchmarking
  3. 3. SupportOperateBuildPlan Standardisation is the key in IT management – LEXTA can provide benchmarks for all standard IT services Company-Profile-LEXTA.pptx Slide 2Source: LEXTA IT VALUE CREATION PYRAMID Standard applications (e.g. SAP/ERP) Data centre facilities (Building, air conditioning, etc.) Hardware (Processors, storage, network) Operating systems (e.g. UNIX, Windows) Databases (e.g. Oracle) = Standard IT benchmarking = LEXTA-specific cost estimate (ProBIT) = LEXTA-specific application benchmarking Individual applications
  4. 4. Slide 3 All IT benchmarking is based on clearly-defined service categories TYPICAL CATEGORIES FOR IT BENCHMARKING Source: LEXTA Networks and Telephony LAN/wireless LAN VPN TelephonyWAN Internet access (incl. firewall) Daily rates Platforms and Databases Web services / portals MiddlewareDatabases Data Centre Applications Standard applications (SAP, incl. IS modules) Application development Custom applications End-User Computing Desktop Printer/peripherals Messaging (e.g. email) Smartphone Virtual client / terminal services Collaboration platforms Standard software / software distribution File / print services Notebook Thin client Basic services (e.g. ADS) Server Data centre LAN Storage ArchiveBackup and restore Co-location Output management Tablet Overheads and general expenses Service desk / user help desk Field service (Break & Fix, IMACD) Company-Profile-LEXTA.pptx
  5. 5. BITKOM’s extensive benchmarking standards… Company-Profile-LEXTA.pptx Slide 4Source: BITKOM CONFORMITY WITH BITKOM BENCHMARKING STANDARDS (1 OF 2) Methodological competence • Standardised approach towards data collection and analysis • Identification and quantification of cost drivers • Verification of data and procedures to identify possible inconsistencies and gaps Experience • Methodological competence in data collection, measurement and comparison • Seniority, experience and continuous availability of the person responsible for benchmarking • Substantial references from benchmarking projects Principles and code of conduct • Open and fair conduct • Observation of legal requirements and confidentiality in data handling • Comprehensive and truthful data collection • Conformity with schedules and milestones • Continuity of project team • Target-oriented preparation and hosting of project meetings Provisioning of an up-to-date, comprehensive pool of data • Coverage of all service components • Coverage of service range and quality • Up-to-date data (< 15 months) • Database granularity as regards service depth • In-house database • First-hand data collection • Data quality assurance • Uniform and standardised services • Frequent updates • Geographical coverage Europa and North America (global within GBN)
  6. 6. …are covered almost perfectly by LEXTA Company-Profile-LEXTA.pptx Slide 5Source: BITKOM CONFORMITY WITH BITKOM BENCHMARKING STANDARDS (2 OF 2) Data collection and analysis • Compilation of technical performance indicators • Collection of service quality data, with particular focus on cost drivers • Recording of the individual company setting • Recording of governance and business processes • Creation of peer groups • Development of categories based on SLAs and / or services • Assessment of special financial items (e.g. asset or human resource transfers, ‘cosmetic’ pricing adjustments, risk spreading) • Data standardisation using price deductions and premiums • Transparent standardisation Full compilation of all factors influencing price • Service specifications • Quality • Complexity • Volumes / amounts • Contract duration • Special arrangements – Project organisation • Application of a three-tiered organisational model (steering committee, project management and team) • Organisation of data collection workshops and coaching sessions • Realistic project planning Presentation of results • Market conformity shown for the results • Best in class results shown • Extensive presentation of the results • Comparison within the same industry sector • Comparison with other industries • Peer group sample size (>= 6) • Indicator analysis • Derivation of levers • Clear and tangible results • Proof of experience via existing references
  7. 7. All IT benchmarks are based on continuously updated data, hand-picked and quality- assured by LEXTA consultants Company-Profile-LEXTA.pptx Slide 6Source: LEXTA LEXTA BENCHMARKING DATABASE Criteria Core content Data quality • Collected at first hand by LEXTA consultants during benchmarking, sourcing and cost optimisation projects, all data is quality-assured • Data is gathered in close cooperation with the customer during contract and cost analyses, and is verified explicitly in joint workshops • No third-party data, no research data Data currency • Benchmarks use recent data with a maximum age of 12 months • For trend extrapolation, time series data is available from the last 10 years Data scope • Current data pool:  Approx. 250 companies  Approx. 1,500 individual contracts  Approx. 50,000 records; 2,500 records for application operation benchmarks Levers and recommendations • All benchmarking categories can draw on an extensive collection of  levers,  price drivers, and  recommendations
  8. 8. A typical IT benchmarking project consists of six phases Company-Profile-LEXTA.pptx Slide 7Source: LEXTA IT BENCHMARKING PROCEDURE 1. Preparation 2. Collection of initial data 3. Normalisation 4. Selection of peer group 5. Execution of benchmarking 6. Identification of levers Phases: • Kick-off • Select contact persons for benchmarking • Classify service modules • Scheduling Content: • Collect information on service portfolio, quantity structures, SLAs, security and costs • Analyse overheads (if necessary) • Research company’s specific regulations • Ensure comparability of IT services • Consider SLA criteria • Scale client data to parameters of comparable systems • Define selection criteria for peer groups • Select inner and outer peer groups as benchmark references • Establish clarity as regards comparability and potential limitations • Calculate costs per IT service • Determine ranking in comparison to competitors • Show costs in comparison to peer groups • Identify causes of cost differences versus peer group • Identify potential for improvement • Plan implementation • Project frameworkResults: • Report on current situation • Report on correction factors • Peer group selected • Benchmarking results • Improvement potential • Overview of levers
  9. 9. Data recording in templates is based on a detailed interrogation of the service descriptions for the services in scope TEMPLATE STRUCTURE Worksheet basic data • Responsible persons for data delivery and quality • Data recording version Worksheet service scope • Definition of service scope Worksheet quantity structure • Recording of relevant quantities Work sheet service levels • Definition of service levels Worksheet technology • Specification of technologies used for service delivery Worksheet costs • Recording of costs (labour, hardware, software, third- party and material costs) for the service Worksheet special data • Identification of additional company-specific information and cost drivers Template content and structure IT Benchmarking Service Service desk Version recorded 0.1 Date of data recording Customer contact LEXTA consultant An extra form (cover sheet) is available for cross-subject data (security, contract conditions, etc.) Source: LEXTA Slide 8 Company-Profile-LEXTA.pptx
  10. 10. Within the normalisation process, comparability between benchmarking participant data is ensured by normalising it against a common reference model Company-Profile-LEXTA.pptx Slide 9Source: LEXTA APPROACH TO NORMALISATION Company 1 Company 2 Company n Client company Reference model Normalisation Normalised and non- normalised data from the companies is available in the benchmarking database Normalisation
  11. 11. Company-Profile-LEXTA.pptx Slide 10 Normalization is not a ‘black box’ but a transparent computation In EUR per ticket Service Normalisation requirement Approach Agreed by contract Normalisation of Markup (+) / markdown (-) Service desk No customer identification prior to call pick-up by agent • Manual identification in approx. 50 % of the calls (LEXTA estimate) • Identification cost of 20 seconds per call (LEXTA estimate) • Customary hourly market rate for qualified support of €65.50 (benchmark mean value) No Peer group + 0.22 Fault analysis only partially included • Estimate of 4 hours per month (LEXTA estimate) for the additional fault analysis • Customary hourly market rate for qualified support of €65.50 (benchmark mean value) Yes Peer group + 0.10 Extended reporting partly included • Estimate of 4 hours per month (LEXTA estimate) for the preparation of further reports • Customary hourly market rate for reporting specialist of €87.50 (benchmark mean value) Yes Peer group – 0.14 Normalisation total Peer group + 0.18 Number of tickets per month 2,500 NORMALISATION ‒ SERVICE DESK PROJECT EXAMPLE Source: LEXTA
  12. 12. The peer groups are selected on the basis of quantitative and qualitative criteria Company-Profile-LEXTA.pptx Slide 11Source: LEXTA SELECTION OF PEER GROUP * = comparable without normalisation = = minor normalisation necessary = needs to be discussed No. Industry Region Number of users Comparability IT provided internally, integrated or externally Service level* Security requirements* Peer company EMEA, FTAA, AFTA 150,000 External 1 Transport and logistics EMEA 60,000 Integrated 2 Utility company EMEA 95,000 Integrated 3 Automotive EMEA, FTAA, AFTA 100,000 External 4 IT service provider EMEA 100,000 External 5 Chemical industry EMEA, FTAA, AFTA 110,000 Integrated 6 Transport and logistics EMEA, FTAA, AFTA 120,000 Integrated 7 Financial services EMEA, FTAA, AFTA 150,000 Internal 8 Industry EMEA, FTAA, AFTA 180,000 External 9 Telecommunications EMEA, FTAA, AFTA 240,000 Integrated 10 Automotive EMEA, FTAA, AFTA 260,000 External PROJECT EXAMPLE
  13. 13. Presented in an anonymised chart, each benchmark serves to indicate the evaluation of prices from service providers or other market participants Company-Profile-LEXTA.pptx Slide 12Source: LEXTA BENCHMARKING RESULT SERVICE DESK 16.45 Rank 10 24.22 Rank 9 21.86 Rank 8 20.17 Rank 7 19.14 Rank 6 16.82 Rank 5 15.57 Rank 4 15.16 Rank 3 13.25 Rank 2 12.88 Rank 1 12.39 Arithmetic mean 17.15 1st quartile 13.73 Price 16.45 In EUR per ticket Example client Benchmark PROJECT EXAMPLE
  14. 14. Slide 13 RECOMMENDED ACTIONS – SERVICE DESK No. Observation Recommended action 1 The number of tickets per user is significantly above the market level • Check ticket volume after successful completion of Windows 7 migration • Investigate staff training needs 2 The proportion of forwarded tickets is 50 percent and thus higher than the market (average at 30 percent) • Check the troubleshooting database and procedure for knowledge transfer within the various departments • Check process steps used for problem management 3 Staff with very good language qualifications; service desk is offered in four languages • Perform a requirements analysis with the goal of reducing the number of languages offered 4 The average Service Desk response time is 350 seconds and is thus much higher than the market (20 seconds) • Increase staffing levels at peak times • Reduce maximum problem resolution time before forwarding Customer Market 0.85 0.65 The reasons for the high ticket volume should be investigated; staff training requirements should also be reviewed Company-Profile-LEXTA.pptx Source: LEXTA PROJECT EXAMPLE
  15. 15. During application benchmarking, LEXTA distinguishes between standard and customised applications Slide 14 APPLICATION BENCHMARKING METHODS Source: LEXTA Topic Standard application benchmark Customised application benchmark Approach • Standard applications (e.g. SAP) share specific ‘standards’ and therefore are compared only with other standard applications • Standard applications compared have the same functionality (e.g. SAP BW) • Customized applications are unique – they are compared to other applications on the basis of operational cost drivers • Applications compared may be functionally distinct Services included • Application operations • Basic operations • Infrastructure • Application operations • Infrastructure (optional) Comparison group • Standard applications from other companies comparable on size / industry • Comparable quantity structure (user, incidents, changes, etc.) • Application with comparable operational cost drivers (incidents, changes, service time, interfaces (APIs), etc.) Company-Profile-LEXTA.pptx
  16. 16. Reliable end-to-end benchmarks are available for the operation of SAP and standard applications Company-Profile-LEXTA.pptx BENCHMARKING APPROACH TO SAP AND OTHER STANDARD APPLICATIONS Applications Benchmark database ERP IS-U BI CRM HCM Mobile Other Dynamics NAV Portal Dynamics AX Salesforce CRM EDI Oracle E-Business Suite Other (e.g. CAD, PLM) SAP Microsoft EUR per account EUR per transaction EUR per master record … End-to-end benchmarks include: • Licenses • Cost of maintenance • Basic application operation • Infrastructure  Databases  Servers  Storage  Backup and restore  DC LAN  Co-location Not included: • Larger implementation / application integration projects • Service desk / user help desk End-to-end benchmarks EUR per SAP landscape EUR per SAP product EUR per SAPS* EUR per user EUR per invoice EUR per infocube Source: LEXTA Slide 15 * SAPS: SAP Application Performance Standard
  17. 17. + Benchmarks for the operation of individual applications are based on the parameters that constitute the primary cost drivers in application operations Company-Profile-LEXTA.pptx BENCHMARKING APPROACH TO INDIVIDUAL APPLICATIONS Primary cost drivers Benchmark database Best-practice costs for application management, based on over 1,000 benchmarked application instances and regression analyses Application operations Infrastructure Databases Server Storage Backup and restore DC LAN Co-location Service desk / user help desk … Source: LEXTA Slide 16 Correlation of cost drivers with operational effort Volume of problems (easy / medium / complex) Platform Availability Service request volume Parametrisation volume Volume of incidents (easy / medium / complex) Volume of changes (easy / medium / complex) Time of service, incl. call-out service Volume of logical partitions Volume of APIs Volume of users Time of service Incidents Changes Time of Service incl. Call-out Service Logical Partitions APIs User Problems Time of Service Platform Availability Service Requests Parametrization
  18. 18. The customer gains a competitive advantage by using SAP BI, but it comes at a price Company-Profile-LEXTA.pptx KPI OVERVIEW FOR SAP BI SALES Improvement of business agility Reduction of application costs 1 2 3 4 5 Age / lifecycle Differentiation of functionality Customer interface Number of stakeholders Maturity of documentation Number of major release changes Build / run ratio Number of weighted changes Implementation time for changes Projects in time / in quality / in budget Maturity of programming language Number of interfaces Innovation strategy Disaster recovery 1 2 3 4 5 Cost per infocube Average cost per change Incident / problem ratio Distribution on- / near- / offshore Number of 3rd-level tickets External maintenance costs Number of incidents p. a. Ratio hotfixes / changes Post-release incidents / changes Nucleus Availability, SaaS, cloud Standardised platform, programming environment Tier levels Virtualisation PROJECT EXAMPLE Source: LEXTA Slide 17
  19. 19. Three methods are used for benchmarking application development Company-Profile-LEXTA.pptx Slide 18 METHODS FOR BENCHMARKING APPLICATION DEVELOPMENT Source: LEXTA Application development effort (Volume in person days, costs in EUR) Benchmarking of development costs Hourly rate benchmarking • Use of Function Point Analysis to evaluate product complexity • Method: market price or cost benchmark, i.e. compare development costs with similarly complex projects from other companies • Demonstrate differences compared to the very best on the market and identify proper instruments Analysis of productivity (‘Productivity Index’) • Evaluation of product complexity and size in comparison with the market (‘XL, L, M, S, XS’) • Evaluation of the productivity index as a percentage • Use of a standardised record sheet for data collection • Method: interviews with 6 - 8 key stakeholders, e.g. project manager, developer, tester, division, service provider, operations • Identification of proper instruments to improve productivity • Evaluation of appropriateness of hourly development rate in comparison with the market • Method: market price or cost benchmark using the SFIA* model  According to skills (e.g. IT Engineer, Consultant, Project Manager) or  According to bundles (e.g. R1 – Creation of product specification and solution concept) • Identification of proper instruments * SFIA: Skill Framework for the Information Age
  20. 20. Application development productivity is evaluated using an adapted standardised record sheet Company-Profile-LEXTA.pptx Slide 19 ANALYSIS OF PRODUCTIVITY: ACTUAL SUBMISSION AND RESULTS FORMAT Source: LEXTA Project organisation Staff ProductProcesses Environment 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 100 % 90 % EXAMPLE Criteria Specification Value Project organisation Project sponsor motivation Low 2 Project sponsor influence Low 2 Goal uniqueness Low 2 Goal conformity High 4 Risk management effectivity and efficiency Medium 3 Development site volume High 1 Proportion of near- / -offshoring Medium 2 Staff Team experience High 4 Team cohesion High 4 Project manager experience Medium 3 Availability of key personnel Low 2 Quality of communication / information exchange within the team Medium 3 Employment of specialists Medium 3 Employee turnover Low 3 Product Stability of requirements Medium 3 Quality of reused products High 4 Quality of development environment used High 4 …
  21. 21. Development project size, complexity and productivity can be correlated to produce a comprehensive evaluation Company-Profile-LEXTA.pptx APPLICATION DEVELOPMENT BENCHMARK – ILLUSTRATION OF RESULTS XS M XLLXL Application size / complexity 0 % 100 % 50 % 75 % 25 % Productivityindex Basic project, badly managed (costs too high) ‘Disastrous project’ (costs much too high) Basic project, well managed Difficult project, well managed Project 2 Project 3 Project 4 Project 1 Productivity index in percent, project cost* in EUR thousand * Size of bubble: 100 50 25 10 Source: LEXTA Slide 20
  22. 22. Business processes can be benchmarked in their entirety or in terms of specific sub-processes Company-Profile-LEXTA.pptx Slide 21 BENCHMARKING PROCESS FOR HUMAN RESOURCES • Number of FTEs per 1,000 staff • Ø personnel costs per FTE • Number of FTEs per 1,000 staff • Ø personnel costs per FTE • Number of FTEs per 1,000 staff • Ø personnel costs per FTE • Processing time per application • Hiring rate • Application rate • Number of FTEs per 1,000 staff • Ø personnel costs per FTE • Costs per payslip • Payroll processing time • Number of payslips with errors per 1,000 staff • Number of FTEs per 1,000 staff • Ø personnel costs per FTE • Number of FTEs per 1,000 staff • Ø personnel costs per FTE • Training and CPD costs/total personnel costs • Ø personnel costs per trainee • Ø number of CPD days per employee HR PlanningHR Marketing HR Procurement Payroll HR Management HR Development HR department (overall) ILLUSTRATIVE • Number of FTEs per 1,000 staff • Average personnel costs per HR dept. employee • Average HR dept. costs per employee • Staff turnover Source: LEXTA
  23. 23. Please contact us for further information Company-Profile-LEXTA.pptx Slide 22Source: LEXTA CONTACT DETAILS Matthias Seidl Managing Director Dorotheenstraße 37 10117 Berlin Germany Phone +49 30 887124-122 Fax +49 30 887124-20 Mobile +49 179 6617730 Email
  24. 24. LEXTA offers a performance portfolio based on IT benchmarking that covers all of the key IT issues in management Company-Profile-LEXTA.pptx Slide 23Source: LEXTA LEXTA PERFORMANCE PORTFOLIO IT Benchmarking IT GovernanceIT Security IT Service Catalogue IT Key Performance Indicators IT SourcingIT Cost Optimisation IT Strategy / IT Business ValueProject Management