Gartner ITBudget Sample 2012

This ITBudget report was created for Jamie Guevara on 14Mar17.
Assessment name: 2017 Sample ITBudget Report
Healthcare Providers vertical industry comparison
To be successful with digital business transformation and optimization, CIOs and IT leaders must communicate the financial story of IT using mature
budgeting practices enabled by actionable financial transparency. The ITBudget tool provides a vehicle to compare IT budget levels to the industry as
well as translate IT costs into business services.
ITBudget Structured Approach
This report contains total IT investment, cost and staffing comparisons against published Gartner Benchmark Analytics industry standard IT metrics.
References to the Gartner IT Key Metrics Data refer specifically to the Gartner Benchmark Analytics Research Note #G00316604, IT Key Metrics Data
2017: Key Industry Measures: Healthcare Providers Analysis: Current Year and Research Note #G00316610, IT Key Metrics Data 2017: Key Industry
Measures: Insurance Analysis: Current Year.
Example Organiza on Key Metric Data Input
Survey respondent data inputs used in this comparison report are not validated by Gartner and are based on the following user submitted data.
IT key metric data inputs or comparison groups can be updated using the "Copy" button on the Gartner ITBudget “My Assessments” page.
http://www.gartner.com/explore/tools/itbudget
Input Currency: USD 2016 2017 2018

Revenue 1,200,000,000 1,400,000,000
Operating Expense 900,000,000 1,100,000,000
Employees 4,700 5,000
IT Budget 2017 IT Budget 2018 IT Budget 2017 2018 % Change
IT Spending/Budget* 30,000,000 32,000,000 6.7%
IT Annual Cost/Budget** 27,000,000 30,000,000 11.1%
IT Budget* by Funding Source
Formal IT Budget 70% 75% 14.3%
Business Unit IT 25% 23% 1.9%
Shadow IT 5% 2% 57.3%
IT Budget* by Asset/Resource
Hardware 15% 17% 20.9%
Software 21% 18% 8.6%
Personnel/Occupancy 40% 38% 1.3%
Outsourcing/ThirdParty IT Services 24% 27% 20.0%
IT Budget* by Investment Class
Run the Business 70% 73% 11.2%
Grow the Business 20% 18% 4.0%
Transform the Business 10% 9% 4.0%
IT Budget* by IT Function
Infrastructure and Operations 50% 47% 0.3%
Applications 47% 48% 8.9%
IT Mgt, Finance, Admin 3% 5% 77.8%
IT Staff 2017 IT Budget 2018 IT Budget 2017 2018 % Change
IT Fulltime Equivalents (FTE) 305 307 0.7%
IT Staff by Source
Insourced IT FTE 88% 85% 2.8%
Contract IT FTE 12% 15% 25.8%
IT Staff by IT Function
© 2017 Gartner, Inc. and/or its affiliates. All rights reserved. Created by a Gartner Diagnos c Tool and does not cons tute Gartner research. Page 1 / 27

IT Fulltime Equivalents (FTE) 305 307 0.7%
IT Staff by Source
Insourced IT FTE 88% 85% 2.8%
Contract IT FTE 12% 15% 25.8%
IT Staff by IT Function
Descrip on of Comparison Group(s)
Your organization has been compared to a primary and secondary comparison group. You have selected your primary comparison group as
organizations within the Healthcare Providers vertical industry as defined below. As an additional point of reference, you have selected the
Insurance Average as a secondary comparison group.
Healthcare Providers vertical industry overview
Industry Average Size:
Descrip on of Comparison Group(s)
Your organization has been compared to a primary and secondary comparison group. You have selected your primary comparison group as
organizations within the Healthcare Providers vertical industry as defined below. As an additional point of reference, you have selected the
Insurance Average as a secondary comparison group.
Healthcare Providers vertical industry overview
Industry Average Size:
Revenue: $2.53 Billion USD
Employees: 15.3 Thousand Employees
Healthcare Providers vertical industry definition
Organizations from which their primary revenue stream is derived from one or more of the following:
Healthcare Facilities, Assisted Living Facilities and Services, Nursing Homes, Retirement Communities, Hospitals and Healthcare Centers,
Veterinary Services and Animal Hospitals, Healthcare Services, Dental Services, Home Healthcare Services, Midwifery and Child Birth
Preparation Services, Nursing Services, Specialist Services, Chiropractic Services, Optometry Services, Healthcare Referral Services.
Medical Laboratory Services, Mental Care Facilities, Rehabilitation Services, Occupational Therapy Services, Physical Therapy Services,
Speech and Language Therapy Services, Medical Practice Organizations, Physician Practice Management Companies, Primary Care
Practitioner Services, Ambulance Services.
IT Budget Comparison Summary
The purpose of this tool is to support your organization’s annual IT budget process. It provides a structured and consistent vehicle to easily
compare your organization's IT budget and staff levels against Gartner IT Key Metrics Data published industry averages.
Example Organiza on Healthcare Providers Insurance

2017 2018
Industry Averages Averages
IT Investment Metrics IT Budget IT Budget
IT Spending as a % of Revenue 2.5% 2.3% 4.3% 3.2%
IT Spending as a % of Operating Expenses 3.3% 2.9% 4.5% 3.5%
IT Spending per Employee (USD) $6,383 $6,400 $6,820 $29,424
IT Spending, by Funding Source
Formal IT Budget 70% 75% 78% 82%
Business Unit IT 25% 23% 15% 13%
Shadow IT 5% 2% 7% 5%
IT Spending, by Accounting Category
IT Capital 30% 31% 25% 25%
IT Operational 70% 69% 75% 75%
IT Spending, by Asset Class
Hardware 15% 17% 18% 11%
Software 21% 18% 26% 22%
Personnel/Occupancy 40% 38% 40% 40%
Outsourcing/ThirdParty IT Services 24% 27% 16% 27%
IT Spending, by Strategic Category
Run the Business IT Spending 70% 73% 74% 66%
Grow the Business IT Spending 20% 18% 16% 22%
Transform the Business IT Spending 10% 9% 10% 12%
IT Spending, by IT Functional Area
Data Center 25% 25% 20% 24%
EndUser Computing 9% 8% 10% 7%
IT Service Desk 6% 5% 5% 4%
Network 10% 9% 13% 9%
Application Development 35% 33% 9% 27%
Application Support 12% 15% 32% 20%
© 2017 Gartner, Inc. and/or its affiliates. All rights reserved. Created by a Gartner Diagnos
IT Management, Finance & Administration 3% c Tool and does not cons
5% tute Gartner research.
11% 9% Page 3 / 27
IT Staffing
IT FTEs as % of Total Employees 6.5% 6.5% 3.0% 12.7%
IT Staffing, by Source
Healthcare Providers vertical industry definition
Organizations from which their primary revenue stream is derived from one or more of the following:
Healthcare Facilities, Assisted Living Facilities and Services, Nursing Homes, Retirement Communities, Hospitals and Healthcare Centers,
Veterinary Services and Animal Hospitals, Healthcare Services, Dental Services, Home Healthcare Services, Midwifery and Child Birth
Preparation Services, Nursing Services, Specialist Services, Chiropractic Services, Optometry Services, Healthcare Referral Services.
Medical Laboratory Services, Mental Care Facilities, Rehabilitation Services, Occupational Therapy Services, Physical Therapy Services,
Speech and Language Therapy Services, Medical Practice Organizations, Physician Practice Management Companies, Primary Care
Practitioner Services, Ambulance Services.
IT Budget Comparison Summary
The purpose of this tool is to support your organization’s annual IT budget process. It provides a structured and consistent vehicle to easily
compare your organization's IT budget and staff levels against Gartner IT Key Metrics Data published industry averages.
Example Organiza on Healthcare Providers Insurance

2017 2018
Industry Averages Averages
IT Investment Metrics IT Budget IT Budget
IT Spending as a % of Revenue 2.5% 2.3% 4.3% 3.2%
IT Spending as a % of Operating Expenses 3.3% 2.9% 4.5% 3.5%
IT Spending per Employee (USD) $6,383 $6,400 $6,820 $29,424
IT Spending, by Funding Source
Formal IT Budget 70% 75% 78% 82%
Business Unit IT 25% 23% 15% 13%
Shadow IT 5% 2% 7% 5%
IT Spending, by Accounting Category
IT Capital 30% 31% 25% 25%
IT Operational 70% 69% 75% 75%
IT Spending, by Asset Class
Hardware 15% 17% 18% 11%
Software 21% 18% 26% 22%
Personnel/Occupancy 40% 38% 40% 40%
Outsourcing/ThirdParty IT Services 24% 27% 16% 27%
IT Spending, by Strategic Category
Run the Business IT Spending 70% 73% 74% 66%
Grow the Business IT Spending 20% 18% 16% 22%
Transform the Business IT Spending 10% 9% 10% 12%
IT Spending, by IT Functional Area
Data Center 25% 25% 20% 24%
Network 10% 9% 13% 9%
IT Management, Finance & Administration 3% 5% 11% 9%
IT Staffing
IT FTEs as % of Total Employees 6.5% 6.5% 3.0% 12.7%
IT Staffing, by Source
Insourced FTEs 88% 85% 89% 77%
Contract FTEs 12% 15% 11% 23%
IT Staffing, by IT Functional Area
Data Center 14% 14% 11% 13%
Network 15% 15% 7% 4%
Source: Gartner IT Key Metrics Data 2017
IT Service Por olio 2018 Plan

Many ingredients are involved in finding or delivering the business value of IT; however, Gartner research shows that three best practices can
demonstrate the value of IT services (see "Three Key Steps Are Needed to Show the Value of IT Services," RN# G00267245).
• Define IT services in the language of the business.
• Create value statements that tie the services to business outcomes.
Network 15% 15% 7% 4%
IT Service Por olio 2018 Plan
Many ingredients are involved in finding or delivering the business value of IT; however, Gartner research shows that three best practices can
demonstrate the value of IT services (see "Three Key Steps Are Needed to Show the Value of IT Services," RN# G00267245).
• Define IT services in the language of the business.
• Create value statements that tie the services to business outcomes.
• Identify metrics to measure the business impact.
2018 IT Service Portfolio Budget
IT Expense IT Expense
Distribution Distribution USD
Total 100% 32,000,000
Front Office Sales / Mktg 6% 1,846,400
Front Office Member Provider Srvc 4% 1,305,600
Front Office New Product Dev 5% 1,712,000
Front Office Actuarial Underwrit 5% 1,715,200
Mid Office Network Mgmt 6% 2,028,800
Mid Office Pop Health Care Mgmt 6% 1,923,200
Mid Office Pharmacy 6% 2,057,600
Mid Office Informatics Quality Im 7% 2,377,600
Back Office Claims Processing 26% 8,432,000
Back Office Member Enrollment 15% 4,832,000
Back Office Billing Reporting 12% 3,769,600
IT Key Metrics Data Comparison Detail
Total IT Spending/Budget Defini on
For the purpose of this research, Gartner has defined "total IT spending" as the following:
"The best estimate of total spending at the end of the 12month budget period for IT to support the enterprise. IT spending/budget can come
from anywhere in the enterprise that incurs IT costs, and it is not limited to the IT organization. It includes estimates by enterprises on
decentralized IT spending and or "shadow IT." It is calculated on an annualized 'cash flow view' basis, and, therefore, contains capital spending
and operational expenses, but not depreciation or amortization."
What the IT Spending/Budget Includes, From a Resource or Cost Perspective
• Hardware, software, personnel (including contractors, travel, benefits and training), outsourcing (external IT services like consulting, system
integration, data and voice transmission, software as a service, infrastructure as a service, platform as a service), disaster recovery and
occupancy costs associated with supporting IT within the enterprise. Costs also include all taxes (except valueadded tax where it is recovered
or refunded to the organization).
• Note: Occupancy costs, include fully burdened costs for the facilities being used by the IT staff supporting the enterprise. Some examples
include office space, furniture, electricity, maintenance, property taxes, security and office supplies. Occupancy costs for space dedicated to IT
functions, such as the data center, including power/heat management and raised floor, are also included.
Mid Office Informatics Quality Im 7% 2,377,600
Back Office Claims Processing 26% 8,432,000
Back Office Member Enrollment 15% 4,832,000
Back Office Billing Reporting 12% 3,769,600
IT Key Metrics Data Comparison Detail
Total IT Spending/Budget Defini on
For the purpose of this research, Gartner has defined "total IT spending" as the following:
"The best estimate of total spending at the end of the 12month budget period for IT to support the enterprise. IT spending/budget can come
from anywhere in the enterprise that incurs IT costs, and it is not limited to the IT organization. It includes estimates by enterprises on
decentralized IT spending and or "shadow IT." It is calculated on an annualized 'cash flow view' basis, and, therefore, contains capital spending
and operational expenses, but not depreciation or amortization."
What the IT Spending/Budget Includes, From a Resource or Cost Perspective
• Hardware, software, personnel (including contractors, travel, benefits and training), outsourcing (external IT services like consulting, system
integration, data and voice transmission, software as a service, infrastructure as a service, platform as a service), disaster recovery and
occupancy costs associated with supporting IT within the enterprise. Costs also include all taxes (except valueadded tax where it is recovered
or refunded to the organization).
• Note: Occupancy costs, include fully burdened costs for the facilities being used by the IT staff supporting the enterprise. Some examples
include office space, furniture, electricity, maintenance, property taxes, security and office supplies. Occupancy costs for space dedicated to IT
functions, such as the data center, including power/heat management and raised floor, are also included.
What the IT Spending/Budget Includes, From an IT Functional Area or Activity Perspective
• The data center (for example, mainframes, servers, storage and facilities), enduser computing devices (for example, desktops, laptops,
tablets, thin clients and smartphones), voice and data networks (including, but not limited to, voice and data transmissions, fixed and mobile
telephony, and internet access services), IT service desk, and applications (for example, development and support).
• IT support functions, such as the office of the CIO; supervisory management; finance and administrative costs, such as purchasing; asset
management; process management; and marketing of IT services.
• Dedicated data processing equipment used in operations, production and engineering environments — examples are computeraided
design/computeraided manufacturing (CAD/CAM) and standard computing equipment used in devices for factory automation, and tablet PCs
used by healthcare professionals.
What the IT Spending/Budget Does Not Include
• Costs for technology or services that are resold. Examples include salaries for developers involved in building commercially packaged
software, or ITskilled employees who provide services for the organizations' external clients.
• Operational technology that is:
• Equipmentbuilt or purchased for nondataprocessing purposes, but which has computerized components. Examples include robotic
manufacturing machines, automated teller machines, specialized pointofsale devices, scanners, blood pressure monitors and sensors on a
supervisory control and data acquisition (SCADA) system.
• Appliancelike or proprietary data processing equipment that has a single (typically industry vertical) purpose and cannot be used for other
general purposes. A typical example is a computer that can only control the flow of electricity through the power grid. Since it cannot be
repurposed, it is not included in our model. Note that other systems that gather data from this type of computer and can be used for other
purposes would not be considered operational technology and, therefore, would be in scope of our model.
• Depreciation or amortization expenses, which could lead to double counting from an accounting perspective.
• Internal "cross charges" and corporate allocations related to large, significant and/or unusual onetime expenses, such as reductions in
workforce, redundancy, relocations, retirement, human resources and chairperson's salary.
• Business data subscriptions and services (such as Bloomberg), even if they are managed by the IT organization.
• Business process outsourcing services (BPO) where organizations outsource entire business functions such as payroll or benefits
management. This includes cases where the BPO vendor provides access to software, and also guarantees that the outcomes of their services
will meet business requirements, such as tax and withholding regulations. Note: where a vendor provides Software as a Service and only
guarantees that the software will perform as specified, then this is in scope of the IT spending/budget. Traditional outsourcing of IT functions, for
example servers and email, are also still within the scope of IT spending/budget.
IT Spending as a Percent of Revenue
IT spending as a percent of revenue is the most recognized measure of total IT investment relative to topline business results.
The value of this measure is that it assists in identifying the competitiveness of investment levels relative to the most fundamental measure of
business performance: revenue. While this has been viewed as a musthave and readily available metric for many enterprises, common
misuses include:
• Looking at a single year rather than multiyear trends
• Basing decisions on the assumption that this figure will not change in the future, sometimes dramatically
• Failing to understand and address changes in the numerator and the denominator of the calculation
• Considering just the average rather than the range of values or the upper and lower quartiles
IT spending as a percent of revenue alone does not highlight why spending levels are at, above or below average (which are often
misinterpreted as "good" or "bad"), nor does it reflect IT's contribution to business performance. Thus, IT spending as a percent of revenue
needs to be considered in tandem with other IT intensity measures, as well as the context of business objectives, the rate of change and the
overall circumstances affecting the numerator, as well as the denominator, of the calculation.
• Depreciation or amortization expenses, which could lead to double counting from an accounting perspective.
• Internal "cross charges" and corporate allocations related to large, significant and/or unusual onetime expenses, such as reductions in
workforce, redundancy, relocations, retirement, human resources and chairperson's salary.
• Business data subscriptions and services (such as Bloomberg), even if they are managed by the IT organization.
• Business process outsourcing services (BPO) where organizations outsource entire business functions such as payroll or benefits
management. This includes cases where the BPO vendor provides access to software, and also guarantees that the outcomes of their services
will meet business requirements, such as tax and withholding regulations. Note: where a vendor provides Software as a Service and only
guarantees that the software will perform as specified, then this is in scope of the IT spending/budget. Traditional outsourcing of IT functions, for
example servers and email, are also still within the scope of IT spending/budget.
IT spending as a percent of revenue is the most recognized measure of total IT investment relative to topline business results.
The value of this measure is that it assists in identifying the competitiveness of investment levels relative to the most fundamental measure of
business performance: revenue. While this has been viewed as a musthave and readily available metric for many enterprises, common
misuses include:
• Looking at a single year rather than multiyear trends
• Basing decisions on the assumption that this figure will not change in the future, sometimes dramatically
• Failing to understand and address changes in the numerator and the denominator of the calculation
• Considering just the average rather than the range of values or the upper and lower quartiles
IT spending as a percent of revenue alone does not highlight why spending levels are at, above or below average (which are often
misinterpreted as "good" or "bad"), nor does it reflect IT's contribution to business performance. Thus, IT spending as a percent of revenue
needs to be considered in tandem with other IT intensity measures, as well as the context of business objectives, the rate of change and the
overall circumstances affecting the numerator, as well as the denominator, of the calculation.
IT Spending as a Percent of Opera ng Expense
IT spending as a percent of operating expense is another view of IT investment levels in terms of the role IT plays in overall business spending
patterns.
While revenue may be subject to externalmarketbased volatilities, business operational expense typically remains much more consistent and
predictable year over year; thus, it better reflects the overall business investment strategy. Typically, organizations with a greater level of IT
investment relative to operating expense view IT as a strategic enabler, and this can improve business performance and productivity levels.
IT Spending as a Percent of Operating Expense
IT Spending per Employee
IT Spending per Employee
IT spending per employee is often used to determine the amount of IT support the average organization's workforce receives.
This measure helps to establish a link between IT investment and automation levels within the context of the workforce that supports revenue.
Variations in this measure can represent nicheindustryspecific delivery processes for service or product delivery, and, thus, should be viewed
in conjunction with revenue and operating income per employee. Organizational staffing strategies and the use of contract employees can also
impact this measure.
An increase in IT spending per employee is often viewed as a negative trend. However, this may not always be the case, as a decrease in
employees (or a lack of increase of additional employees when business improves) can result in a higher value, simply because there are a
smaller number of employees that are divided into the same or increasing IT spending size. Therefore, the overall trend may have been
impacted by continuing lower levels of general employment and the fact that, in many cases, organizations have returned to profitability, but
have been reluctant to increase hiring. For informationintensive enterprises, an increase in their figure for IT spending per employee may
indicate a productivity improvement, due to automation or digitization.
IT Spending per Employee (USD)
Business Productivity
Revenue per Employee
Revenue per employee can help determine employee productivity in terms of revenue generation intensity. This measure is typically influenced
by organizational business model and staffing strategy. Those enterprises that are highly labor intensive operations tend to generate a lesser
amount of revenue per individual as compared to those enterprises who are highly automated. Effective and efficient uses of IT enable
business processes to be streamlined, thus increase the level of employee productivity in terms of business results. While revenue may
represent top line business results, it does not represent an organization’s ability to generate income. This measure should be considered
within the context of the enterprise operating model which drives operating income and profit margin as well as within the context of the total
workforce strategy.
Revenue per Employee (USD)

Business Productivity
Revenue per Employee
Revenue per employee can help determine employee productivity in terms of revenue generation intensity. This measure is typically influenced
by organizational business model and staffing strategy. Those enterprises that are highly labor intensive operations tend to generate a lesser
amount of revenue per individual as compared to those enterprises who are highly automated. Effective and efficient uses of IT enable
business processes to be streamlined, thus increase the level of employee productivity in terms of business results. While revenue may
represent top line business results, it does not represent an organization’s ability to generate income. This measure should be considered
within the context of the enterprise operating model which drives operating income and profit margin as well as within the context of the total
workforce strategy.
Revenue per Employee (USD)
IT Budget Distributions: Uncover the Facts
Up to this point, the figures have shown spending trends overall without distinguishing between the strategic, financial or operational categories
that compose them. Through these categories, you can draw conclusions about critical investment areas, key investment themes and
competitive spending levels.
Centralized versus Decentralized IT Spending: Formal IT Budget, Business Unit IT and Shadow IT
IT spending can come from a number of different sources within an enterprise or organization, and is not restricted to the formal IT Budget.
Additional spending can occur within business unit budgets and be what is known as "shadow IT." The sources of IT spending are defined as
follows:
• Formal IT Budget: IT spending that the IT department is accountable for. The IT department is answerable for the provision of these IT assets
and services.
• Business Unit IT: IT spending where profit centers or overhead departments are accountable. For this category the IT department is consulted
as a subject matter expert, and there is twoway communication..
• Shadow IT: IT spending anywhere in the enterprise for which the IT department is not accountable. For this category the IT department is
aware of spending, but may not have detailed information about it. Amounts here may need to be estimated..
For the purposes of this metric the IT department is defined as the formal organization headed by the CIO/senior IT leader of the entity being
analyzed. It also includes any IT organization reporting into them.
Understanding how much IT spending occurs outside the formal IT budget allows organizations to gauge the true extent of their IT spending, and
ensure for example that IT budget cost cutting exercises do not simply result in IT spending occurring elsewhere in the business. Getting the
right mix of the formal IT budget, business unit IT and shadow IT can depend upon many factors, and needs to be appropriate for the
circumstances of the individual organization. Shadow IT can occur because the business wants to move faster than the formal IT departments
© 2017 Gartner, Inc. and/or its affiliates. All rights reserved. Created by a Gartner Diagnos c Tool and does not cons tute Gartner research.
processes allow, and can lead to a lack of central governance and control. However not all shadow IT should necessarily be view as "bad." Page 9 / 27
Centralized versus Decentralized IT Spending: Distribution of IT Spending between Formal IT Budget, Business Unit IT and
Shadow IT
IT Budget Distributions: Uncover the Facts
Up to this point, the figures have shown spending trends overall without distinguishing between the strategic, financial or operational categories
that compose them. Through these categories, you can draw conclusions about critical investment areas, key investment themes and
competitive spending levels.
Centralized versus Decentralized IT Spending: Formal IT Budget, Business Unit IT and Shadow IT
IT spending can come from a number of different sources within an enterprise or organization, and is not restricted to the formal IT Budget.
Additional spending can occur within business unit budgets and be what is known as "shadow IT." The sources of IT spending are defined as
follows:
• Formal IT Budget: IT spending that the IT department is accountable for. The IT department is answerable for the provision of these IT assets
and services.
• Business Unit IT: IT spending where profit centers or overhead departments are accountable. For this category the IT department is consulted
as a subject matter expert, and there is twoway communication..
• Shadow IT: IT spending anywhere in the enterprise for which the IT department is not accountable. For this category the IT department is
aware of spending, but may not have detailed information about it. Amounts here may need to be estimated..
For the purposes of this metric the IT department is defined as the formal organization headed by the CIO/senior IT leader of the entity being
analyzed. It also includes any IT organization reporting into them.
Understanding how much IT spending occurs outside the formal IT budget allows organizations to gauge the true extent of their IT spending, and
ensure for example that IT budget cost cutting exercises do not simply result in IT spending occurring elsewhere in the business. Getting the
right mix of the formal IT budget, business unit IT and shadow IT can depend upon many factors, and needs to be appropriate for the
circumstances of the individual organization. Shadow IT can occur because the business wants to move faster than the formal IT departments
processes allow, and can lead to a lack of central governance and control. However not all shadow IT should necessarily be view as "bad."
Centralized versus Decentralized IT Spending: Distribution of IT Spending between Formal IT Budget, Business Unit IT and
Shadow IT
IT Operational vs. Capital Spending

IT Operational vs. Capital Spending
IT Spending Distribu on: Hardware, So ware, Personnel, Outsourcing

The distribution of spending between hardware, software, personnel and outsourcing costs can show the dynamics of IT investments. For the
purpose of this research, personnel includes occupancy/facilities costs and outsourcing includes public cloud services as well as thirdparty
network transmission expenses.
This measure can be helpful in adding context to the IT investment strategy from a sourcing perspective, in terms of accountingbased
resources that may be insourced (e.g., IT hardware, software, personnel and occupancy/facilities costs) vs. services delivered by a thirdparty
(e.g., outsourced services, "X" as a Service (XaaS) and data/voice transmission costs). As an organization increases or decreases the level of
thirdparty/outsourced services, it may find an inverse effect in its associated personnel, hardware and/or software expenditures, depending on
the scope of thirdparty services retained and on business requirements. The cyclical nature of capital investments in IT hardware and software
may also play a significant role in an organization's IT spending outlay during a given year.
IT Spending Distribution: Hardware, Software, Personnel, Outsourcing
Strategic IT Spending Categories: IT Spending to Run the business, IT Spending to Grow the business and IT Spending
to Transform the business
The distribution of IT spending to "run the business," "grow the business" and "transform the business" provides a view of the IT investment
profile or "portfolio" to support business performance. In some industries, it is not uncommon to see a high "run" focus — typically because
organizations in the industry are not planning strong changes in business model growth or high organic growth — which often translates into a
more "cost center" role for IT in the industry or niche sector.
Strategic IT Spending Categories: IT Spending to Run the business, IT Spending to Grow the business and IT Spending
to Transform the business
The distribution of IT spending to "run the business," "grow the business" and "transform the business" provides a view of the IT investment
profile or "portfolio" to support business performance. In some industries, it is not uncommon to see a high "run" focus — typically because
organizations in the industry are not planning strong changes in business model growth or high organic growth — which often translates into a
more "cost center" role for IT in the industry or niche sector.
Classifying IT spending into categories that show impact on business outcomes or success can aid alignment and quantify underinvestment in
IT. Gartner uses the following portfolio spending categories and defines them as follows:
• Run the business: This is an indicator of how much of the IT resource is consumed and focused on the continuing operation of the business. It
includes all nondiscretionary expenses as part of the runthebusiness cost. Some businesses call this "business as usual," "keep the lights on"
IT spending, or sustain investments. Run expenses do not directly increase revenue, or achieve by themselves new or enhanced goals of the
enterprise.
• Grow the business: This is an indicator of how much of the IT resource is consumed and focused on developing and enhancing IT systems in
support of business growth (typically organic growth). Discretionary investments are more likely to be included in the growthebusiness or
transformthebusiness cost.
• Transform the business: This is an indicator of how much of the IT resource is consumed and focused on implementing technology systems
that enable the enterprise to enact new business models. This is very much a "venture" category and would be represented by activities such as
an insurer introducing usagebased insurance products such as telematics or a supermarket combining real time analytic monitoring with in
store task management to provide automated alerts to store staff to perform preemptive tasks.
Gaps in business alignment can be found by examining IT spending as it relates to the daytoday operations of a business (run), the organic
growth of the business or productivity improvement (grow) and its support with new revenue creation from major business transformation, new
products, services or business models (transform).
A common misconception with this measure is that an IT initiative that may transform the IT organization, such as data center modernization or
virtualization, should be classified as a "transform the business" investment. While these IT initiatives do transform the IT organization, they
should primarily be classified as "run the business" investments because they support preexisting IT services. IT transformation often leads to
new business process improvements that enable the business to grow or build new revenue streams; therefore, these costs would need to be
evaluated and distributed based on IT service and business performance. The run, grow and transform the business framework should always
be viewed in business terms with respect to how IT will enable the business to grow or transform revenue, operating income and/or profit
margins.
Strategic IT Spending Portfolio: IT Spending to Run, Grow and Transform the Business IT Spending
Determining the Business Context for Value
As organizations leverage the run, grow and transform the business concepts at a macro level, Gartner has found it helpful to define various IT
investments (and portions of investments) with the same basic framework to illustrate the projected impact at the individual IT initiative and
project levels.
With a basic understanding of the framework, as outlined here, organizations can apply the decision tree to select the category that best
describes business value for their IT initiatives.
Determining the Business Context for Value
As organizations leverage the run, grow and transform the business concepts at a macro level, Gartner has found it helpful to define various IT
investments (and portions of investments) with the same basic framework to illustrate the projected impact at the individual IT initiative and
project levels.
With a basic understanding of the framework, as outlined here, organizations can apply the decision tree to select the category that best
describes business value for their IT initiatives.
Strategic IT Spending : Decision Tree
Source: Gartner 2017
The Link to Strategy
The run, grow and transform the business framework is a starting point for the overall process of measuring, forecasting and communicating IT
value. Gartner believes that the initial language and metrics used for business value are critical success factors in the organization's ability to
make good IT investment decisions. For organizations that are looking for best practice, consider linking individual IT services to individual
business process performances in a causal chain.
For more information on run, grow and transform the business, see "Run, Grow and Transform the Business IT Spending: Approaches to
Categorization and Interpretation."
Distribu on of IT Spending, by IT Func onal Area

The distribution of IT spending by IT functional area provides a view of key IT budget consumption in the context of investment into the overall IT
portfolio to support those IT functional areas:
Note: Gartner is asking that the Functional Area Distribution of IT Spending be calculated based as “Cash Out” (IT Operating Expenses plus IT
Capital) rather than “Accounting” (IT Operating Expenses plus IT Depreciation).
• The comparison data here is based on previously collected information and will remain as “Accounting”. Gartner believes in the long run these
two methods should produce a similar result. Once Gartner has an appropriate amount of responses, the comparisons will be based on “cash
out”
The distribution of IT expenses into these categories helps to define the relative level of IT resources required to support the technology
The Link to Strategy
The run, grow and transform the business framework is a starting point for the overall process of measuring, forecasting and communicating IT
value. Gartner believes that the initial language and metrics used for business value are critical success factors in the organization's ability to
make good IT investment decisions. For organizations that are looking for best practice, consider linking individual IT services to individual
business process performances in a causal chain.
For more information on run, grow and transform the business, see "Run, Grow and Transform the Business IT Spending: Approaches to
Categorization and Interpretation."
Distribu on of IT Spending, by IT Func onal Area

The distribution of IT spending by IT functional area provides a view of key IT budget consumption in the context of investment into the overall IT
portfolio to support those IT functional areas:
Note: Gartner is asking that the Functional Area Distribution of IT Spending be calculated based as “Cash Out” (IT Operating Expenses plus IT
Capital) rather than “Accounting” (IT Operating Expenses plus IT Depreciation).
• The comparison data here is based on previously collected information and will remain as “Accounting”. Gartner believes in the long run these
two methods should produce a similar result. Once Gartner has an appropriate amount of responses, the comparisons will be based on “cash
out”
The distribution of IT expenses into these categories helps to define the relative level of IT resources required to support the technology
environment portfolio. This is often leveraged in tandem with IT resource planning exercises, wherein annual spending and staff resource
allocations can be viewed in terms of investment in IT infrastructure (data center, enduser computing, IT service desk, network) vs. applications
(application development and application support) vs. IT overhead (IT management, IT finance and IT administration). While this measure is
helpful in identifying relative volumes of IT resource consumption by IT functional area, as compared to industry, it does not aid in identifying
whether resources are being leveraged in a costeffective or productive manner.
Distribution of IT Spending, by IT Functional Area
To better understand IT functional costefficiency levels, Gartner recommends identifying which IT functional area is has the largest variance
from the industry mean, then evaluate the individual IT functional annual costs compared with the workload supported, within the context of your
service levels, complexity, demand and scale based on the model and metrics outlined in Gartner's various "IT Key Metrics Data: Key
Infrastructure Measures" research outlined in the "IT Functional Area Framework" section of the Appendix.
IT Portfolio Trends: Staffing
As we have seen in preceding figures, internal staff typically represents more than onethird of the overall IT investment, which demonstrates the
considerable human component of the IT portfolio. As such, it is critical for organizations to understand whether they are staffed adequately,
whether their human resources are effective and whether they are sufficiently trained and motivated to meet changing business needs. The
following metrics provide a broad view of IT staffing levels as compared to the industry.
IT Full‐Time Equivalents (FTEs) as a Percent of Employees
IT FTEs as a percent of employees is a key measure of IT support investment from a human capital perspective.
Understanding the relative level of IT staff dedicated to supporting the business can also assist in identifying whether the staff size is
To better understand IT functional costefficiency levels, Gartner recommends identifying which IT functional area is has the largest variance
from the industry mean, then evaluate the individual IT functional annual costs compared with the workload supported, within the context of your
service levels, complexity, demand and scale based on the model and metrics outlined in Gartner's various "IT Key Metrics Data: Key
Infrastructure Measures" research outlined in the "IT Functional Area Framework" section of the Appendix.
IT Portfolio Trends: Staffing
As we have seen in preceding figures, internal staff typically represents more than onethird of the overall IT investment, which demonstrates the
considerable human component of the IT portfolio. As such, it is critical for organizations to understand whether they are staffed adequately,
whether their human resources are effective and whether they are sufficiently trained and motivated to meet changing business needs. The
following metrics provide a broad view of IT staffing levels as compared to the industry.
IT Full‐Time Equivalents (FTEs) as a Percent of Employees
IT FTEs as a percent of employees is a key measure of IT support investment from a human capital perspective.
Understanding the relative level of IT staff dedicated to supporting the business can also assist in identifying whether the staff size is
appropriate. This should be considered within the context of the overall enterprise sourcing strategy and futurestate objectives. Variables to
consider in tandem with this metric include IT staffing distribution, contract vs. insourced FTEs, and IT outsourcing as a percent of IT spending,
as well as the enterprise sourcing strategy (i.e., does the total employee count accurately represent the organization's workforce that is
supported by IT? Do you have the ability to track the total number of internal users supported by IT?
IT FTEs as a Percent of Employees
Distribu on of IT FTEs: Insourced vs. Contractor
The distribution of IT FTEs insourced vs. contractor can help provide a view of the IT staffing strategy.
IT contract labor or contractor usage can be an effective approach to maintaining flexibility and agility when business conditions are changing.
However, keeping contractors for extended periods can be costly and limit process standardization.
Distribution of IT FTEs: Insourced vs. Contractor
Distribu on of IT FTEs: Insourced vs. Contractor
The distribution of IT FTEs insourced vs. contractor can help provide a view of the IT staffing strategy.
IT contract labor or contractor usage can be an effective approach to maintaining flexibility and agility when business conditions are changing.
However, keeping contractors for extended periods can be costly and limit process standardization.
Distribution of IT FTEs: Insourced vs. Contractor
Distribu on of IT Staff, by IT Func onal Area

The distribution of IT staff by IT functional area provides a view of key IT resource consumption in the context of the overall IT portfolio.
By viewing human resources (IT FTEs) within the context of the total portfolio, organizations are able to identify which environment is the most
laborintensive as a percent of the IT labor pool. Typically, application activities (development and support) demand the most resources from a
cost as well as a staffing perspective. The degree to which an organization outsources should be considered alongside such staffing metrics.
To better understand IT functional area staff productivity levels, Gartner recommends evaluating individual IT functional staffing levels compared
with the workload supported, within the context of service levels, complexity, demand and scale. For more information on productivity measures
by IT functional area, see Gartner's various "IT Key Metrics Data: Key Infrastructure Measures" research (which is cited throughout this report).
Distribution of IT Staff, by IT Functional Area

Distribu on of IT Staff, by IT Func onal Area

The distribution of IT staff by IT functional area provides a view of key IT resource consumption in the context of the overall IT portfolio.
By viewing human resources (IT FTEs) within the context of the total portfolio, organizations are able to identify which environment is the most
laborintensive as a percent of the IT labor pool. Typically, application activities (development and support) demand the most resources from a
cost as well as a staffing perspective. The degree to which an organization outsources should be considered alongside such staffing metrics.
To better understand IT functional area staff productivity levels, Gartner recommends evaluating individual IT functional staffing levels compared
with the workload supported, within the context of service levels, complexity, demand and scale. For more information on productivity measures
by IT functional area, see Gartner's various "IT Key Metrics Data: Key Infrastructure Measures" research (which is cited throughout this report).
Distribution of IT Staff, by IT Functional Area
Next Steps:
Shi the Focus to Business Op miza on
Creation of the service portfolio is not the final endgame. After IT has created the service portfolio, it is important to demonstrate the value each
service can bring to the business by creating a link to business metrics. In this diagram, we can see how each IT service contributes to
improvement of a business outcome. CIOs and IT leaders should always keep this link in mind and talk in business outcomes rather than
focusing only on IT costs and IT service levels. Cost management is important in that it helps to demonstrate the credibility of cost management;
by itself, however, it does very little to demonstrate business value. CIOs that can master running IT as a business stand a greater chance of
being able to access greater budgets across the business. Once IT can become known in the business as having the ability to help contribute
toward factors such as improving customer retention or operational efficiency, CIOs will be invited to contribute at a greater level toward helping
shape business strategy. For more information, see "How to Shift the Focus From IT Cost Cutting to Business Optimization" and "Three Key
Steps Are Needed to Show the Value of IT Services."

Next Steps:
Shi the Focus to Business Op miza on
Creation of the service portfolio is not the final endgame. After IT has created the service portfolio, it is important to demonstrate the value each
service can bring to the business by creating a link to business metrics. In this diagram, we can see how each IT service contributes to
improvement of a business outcome. CIOs and IT leaders should always keep this link in mind and talk in business outcomes rather than
focusing only on IT costs and IT service levels. Cost management is important in that it helps to demonstrate the credibility of cost management;
by itself, however, it does very little to demonstrate business value. CIOs that can master running IT as a business stand a greater chance of
being able to access greater budgets across the business. Once IT can become known in the business as having the ability to help contribute
toward factors such as improving customer retention or operational efficiency, CIOs will be invited to contribute at a greater level toward helping
shape business strategy. For more information, see "How to Shift the Focus From IT Cost Cutting to Business Optimization" and "Three Key
Steps Are Needed to Show the Value of IT Services."
Conclusions
A successful IT performance measurement program communicates metrics that are important to a target audience. This remains true when
communicating IT investments to the business. The metrics and benchmarks that Gartner has identified here provide a highlevel view of current
trends in IT by industry. They also reveal trends in business alignment, staffing, technology and outsourcing. They can be used to assist in
communicating alignment with the business and in evaluating targets in key technology areas. They provide context for key business decisions
and internal performance measures.
It is important to understand that the published averages are not targets, and decisions of "good" or "bad" performance should not be based on
these metrics. They are indicative reference points from which to view current performance and investment levels to help you identify
differences that could merit further analysis. Articulating why your organization is higher or lower than these metrics is the first step in better
business alignment and the communication of IT's impact on business performance.
For more detailed metrics focused on IT infrastructure cost and performance, consult Gartner's various "IT Key Metrics Data: Key Infrastructure
Measures" research, which can help provide more insight into ITcentric cost efficiency and productivity metrics.
For more detailed metrics focused on IT application spending, staffing and project measures, consult Gartner's "IT Key Metrics Data: Key
Applications Measures" research, which can help provide more insight into total application development vs. support metrics.
Related Gartner IT Key Metrics Data Research
IT metrics research included in this report is part of a set of Gartner Benchmark Analytics research pieces.
Depending upon your subscription level for Gartner services, some clients have access to the Gartner IT Key Metrics Data publication series
via the link at gartner.com, select "Explore," "Metrics & Tools," and under “IT Key Metrics Data,” select "Learn More."
For detailed list of published IT Key Metrics Data published, review "IT Key Metrics Data 2016: Index of Published Documents and Metrics";
Gartner RN # G00291331, for a comprehensive list of all available IT Key Metrics Data research.
IT Key Metrics Data 2017: Executive Summary
IT Key Metrics Data 2017: Resources to Review Your ITBudget Comparison Report
and internal performance measures.
It is important to understand that the published averages are not targets, and decisions of "good" or "bad" performance should not be based on
these metrics. They are indicative reference points from which to view current performance and investment levels to help you identify
differences that could merit further analysis. Articulating why your organization is higher or lower than these metrics is the first step in better
business alignment and the communication of IT's impact on business performance.
For more detailed metrics focused on IT infrastructure cost and performance, consult Gartner's various "IT Key Metrics Data: Key Infrastructure
Measures" research, which can help provide more insight into ITcentric cost efficiency and productivity metrics.
For more detailed metrics focused on IT application spending, staffing and project measures, consult Gartner's "IT Key Metrics Data: Key
Applications Measures" research, which can help provide more insight into total application development vs. support metrics.
Related Gartner IT Key Metrics Data Research
IT metrics research included in this report is part of a set of Gartner Benchmark Analytics research pieces.
Depending upon your subscription level for Gartner services, some clients have access to the Gartner IT Key Metrics Data publication series
via the link at gartner.com, select "Explore," "Metrics & Tools," and under “IT Key Metrics Data,” select "Learn More."
For detailed list of published IT Key Metrics Data published, review "IT Key Metrics Data 2016: Index of Published Documents and Metrics";
Gartner RN # G00291331, for a comprehensive list of all available IT Key Metrics Data research.
IT Key Metrics Data 2017: Executive Summary
IT Key Metrics Data 2017: Resources to Review Your ITBudget Comparison Report
IT Key Metrics Data 2017: Index of Published Documents and Metrics
IT Key Metrics Data 2017: Definition of Industries
IT Key Metrics Data 2017: Demographics
Recommended Reading
Access to these documents is dependent upon your level of Gartner subscription.
Best Practices to Drive Cost and Value Optimization in IT Management
How to Shift the Focus From IT Cost Cutting to Business Optimization
How CIOs Influence Decisions When Every Budget Is an IT Budget
Leadership Development Module 3, Chapter 5: Budgeting Fundamentals of IT Management
Leadership Development Module 3, Chapter 7: Cost Transparency, Allocation and Recovery
Avoid Dangerous CostCutting Traps, and Embrace Gartner's Cost Optimization Approach
The Gartner Top 10 Recommended IT Cost Optimization Ideas 2016
Five Principles Underpin IT Cost Optimization Success
Ten Ideas for Business Cost Optimization in the Age of Digital Business
Enhancing and Communicating Performance and Measurement of Business Value of IT Primer for 2017
Appendix The power of Benchmark Analytics throughout Gartner
In addition to Benchmark Analytics research, Gartner's consulting based Benchmark Analytics capabilities delivers client specific prescriptive
benchmarks against discrete industry peers from within your competitive landscape.
Gartner Consulting's contemporary and prescriptive benchmark analytics solutions are unparalleled in the IT marketplace. By bringing together
industry leading, independent research and advisory capabilities with client focused consulting services and the world’s largest IT
benchmarking database we address our clients most important challenges and produce tangible results.
More information on Gartner Benchmark Analytics can be obtained by contacting your Account Executive, Or
[email protected]

benchmarks against discrete industry peers from within your competitive landscape.
Gartner Consulting's contemporary and prescriptive benchmark analytics solutions are unparalleled in the IT marketplace. By bringing together
industry leading, independent research and advisory capabilities with client focused consulting services and the world’s largest IT
benchmarking database we address our clients most important challenges and produce tangible results.
More information on Gartner Benchmark Analytics can be obtained by contacting your Account Executive, Or
[email protected]

Appendix Glossary of Terms
Revenue
Revenue is defined as follows:
Appendix Glossary of Terms
Revenue
Revenue is defined as follows:
• "The enterprise revenue associated with the business units supported by the IT organization (banks should use total interest income plus
noninterest income minus provision for loan losses, while insurance companies should use gross written premiums and other income)."
Business Opera onal Expense
Business operational expense is defined as follows:
• "The total expense associated with the business units supported by the IT organization. This includes items such as selling, general and
administrative expenses, cost of goods sold (or cost of revenue), research and development, depreciation, and depletion and amortization
expenses. For insurance, this includes underwriting expenses and loss and lossadjustment expenses; for banking organizations, it includes
interest expenses and noninterest expenses; for government and nonprofit organizations, it is represented by the enterprise operating budget."
Employees
Organization employee count is defined as:
• "The count of employees (i.e., head count, excluding enterprise contractors and consultants), regardless of whether these employees are
frequent users of the technology supported by the IT organization. This includes fulltime and parttime employees, or as reported in the public
record."
IT Full‐ me Equivalents (IT FTEs)
IT FTE is defined as follows:
• "An IT FTE represents the logical staff to support functions performed by the physical staff, measured in calendar time. This includes all
staffing levels within the organization, from managers and project leaders to daily operations personnel. This also includes insourced FTEs and
contract FTEs. However, this excludes the staff of a thirdparty vendor (for example, IT outsourcing), which is not operationally managed by the
inhouse staff, but rather is managed by the vendor."
Insourced IT FTE is defined as:
• "FTEs who are employed by the IT organization (excluding contractors and consultants). These include all fulltime and parttime employees
supporting the IT environment, as defined by IT spending/budget."
Contract IT FTE is defined as:
• "Contract FTEs (contractors) who are supplemental to your staff and are "operationally" managed by the inhouse staff. These include all full
time, parttime and temporary contractors supporting the IT environment, as defined by IT spending/budget."
IT Opera onal vs. Capital Spending
IT operational expense is defined as:
• "The total daytoday operations and maintenance expenses for this fiscal year that have not been capitalized. These do not include any
amortization and depreciation expenses."
IT capital spending is defined as:
• "The total capitalized IT spending for the fiscal year (i.e., the full value of capitalized assets acquired in the fiscal year). This includes
investments in new application development and IT infrastructure."

The definitions of each category are as follows:
• Hardware Expenses: These include all hardware expenses described in the IT spending/budget definition.
• Software Expenses: These include all software expenses described in the IT spending/budget definition.
• Personnel/Occupancy Expenses: These include:
• Salary and Benefits Expenses: "These should include salary (including overtime pay), benefits and "other" employee costs, such as
travel and training for all IT FTEs. The "benefit load" should include costs for bonuses, paid holidays, vacations, medical/dental
coverage, life and accident insurance, retirement plans, stock plans, disability, Social Security, unemployment compensation, dependent
care, tuition reimbursements and employee assistance programs (for example, physical exams, exercise programs and similar costs)."
• Occupancy/Facilities Expenses: "These include fully burdened costs for the facilities being used by the staff that supports the
enterprise. Some examples include office space, furniture, electricity, maintenance, property taxes, security and office supplies.
Occupancy costs for space dedicated to IT functions, such as the data center (including power/heat management and raised floor/slab
using overhead cable trays, etc.), are also included."
• Outsourcing Expenses: "These include the fees for thirdparty or outsourcing contracts in which "outsourcing" is defined as "any situation in
IT Opera onal vs. Capital Spending
IT operational expense is defined as:
• "The total daytoday operations and maintenance expenses for this fiscal year that have not been capitalized. These do not include any
amortization and depreciation expenses."
IT capital spending is defined as:
• "The total capitalized IT spending for the fiscal year (i.e., the full value of capitalized assets acquired in the fiscal year). This includes
investments in new application development and IT infrastructure."

The definitions of each category are as follows:
• Hardware Expenses: These include all hardware expenses described in the IT spending/budget definition.
• Software Expenses: These include all software expenses described in the IT spending/budget definition.
• Personnel/Occupancy Expenses: These include:
• Salary and Benefits Expenses: "These should include salary (including overtime pay), benefits and "other" employee costs, such as
travel and training for all IT FTEs. The "benefit load" should include costs for bonuses, paid holidays, vacations, medical/dental
coverage, life and accident insurance, retirement plans, stock plans, disability, Social Security, unemployment compensation, dependent
care, tuition reimbursements and employee assistance programs (for example, physical exams, exercise programs and similar costs)."
• Occupancy/Facilities Expenses: "These include fully burdened costs for the facilities being used by the staff that supports the
enterprise. Some examples include office space, furniture, electricity, maintenance, property taxes, security and office supplies.
Occupancy costs for space dedicated to IT functions, such as the data center (including power/heat management and raised floor/slab
using overhead cable trays, etc.), are also included."
• Outsourcing Expenses: "These include the fees for thirdparty or outsourcing contracts in which "outsourcing" is defined as "any situation in
which the full operational responsibility for IT services is completely handed over to an external service provider (for example, print,
maintenance, procurement, system management, equipment)." This includes outsourced thirdparty data and voice transmission
services/expenses, as well as public cloud based IT services, such as SaaS, PaaS, and IaaS."
IT Func onal Area Framework
The following sections provide guidance on how to count costs and FTE numbers, as defined by the scope of the IT functional area
framework/chart of accounts.
Data Center
Note: Data center (enterprise computing, storage and facilities) includes Windows, Unix and Linux servers, mainframe, storage and any other
platform running in the data center.
Hardware
• Processing devices: Include all hardware in server platform configurations, including internal disk storage, controllers, external disk arrays,
tape libraries, optical jukeboxes, processors, memory, cards as well as other offline media supplies.
Software
• Annual costs for host and virtual OS licenses, virtualization and partitioning software, utilities, databases, middleware, content/document
management search engines, messaging, communications (TCP/IP, FTP and hostbased) and server security software.
Connectivity
• Intradatacenter connectivity: This typically includes routers, switches, load balancers, controllers and appliances. Data center communication
networks are dedicated networks that are segregated or isolated from the generalpurpose LANs or WANs. Generalpurpose or shared
network costs are excluded from the data center and should be allocated to the data network.
• Interdatacenter connectivity: This typically includes the transmission cost and hardware cost for the fiber, used and unused (dark fiber), and
the switches and controllers. Data center remote communication networks are dedicated networks that are segregated or isolated from the
generalpurpose LAN or WAN. Generalpurpose or shared network costs are excluded from the data center and should be allocated to the data
network.
Disaster Recovery
• Includes disaster recovery contracts (compute and communications) for hot sites (shell facilities), dedicated hardware, software and
connectivity.
Facilities / Occupancy
• Costs for power/heat management, furniture, access systems, office space, raised floor and / or slab using overhead cable trays etc.
Personnel
• Operations/maintenance, engineering technical services, planning and process management, service administration, management and
administration, and facilities management.
EndUser Computing
Hardware
• User client and peripheral hardware: desktop, laptop, thinclient and tablet PCs, personal and shared printers, multifunctional printers (MFPs
or MFDs), handheld devices such as smartphones, and messaging devices.
• Transmission costs for these devices are excluded and should be allocated to the data network.
• IT management hardware: This encompasses hardware that primarily supports an IT process, not a business or user process. Examples are
test and training devices, servers hosting network and system management (NSM) or asset management software, and devices used by the IT
staff supporting the enduser computing environment. This also includes supporting a hosted virtual desktop (HVD) installation.
Software
• User client software.
• Personal productivity and database: This includes new word processors, spreadsheets, presentation packages, personal databases and
other personal productivity software executing on client systems. It also includes upgrades.
• Messaging and groupware: This includes new and upgraded email, groupware and collaboration software.
Disaster Recovery
• Includes disaster recovery contracts (compute and communications) for hot sites (shell facilities), dedicated hardware, software and
connectivity.
Facilities / Occupancy
• Costs for power/heat management, furniture, access systems, office space, raised floor and / or slab using overhead cable trays etc.
Personnel
administration, and facilities management.
EndUser Computing
Hardware
• User client and peripheral hardware: desktop, laptop, thinclient and tablet PCs, personal and shared printers, multifunctional printers (MFPs
or MFDs), handheld devices such as smartphones, and messaging devices.
• Transmission costs for these devices are excluded and should be allocated to the data network.
• IT management hardware: This encompasses hardware that primarily supports an IT process, not a business or user process. Examples are
test and training devices, servers hosting network and system management (NSM) or asset management software, and devices used by the IT
staff supporting the enduser computing environment. This also includes supporting a hosted virtual desktop (HVD) installation.
Software
• User client software.
• Personal productivity and database: This includes new word processors, spreadsheets, presentation packages, personal databases and
other personal productivity software executing on client systems. It also includes upgrades.
• Messaging and groupware: This includes new and upgraded email, groupware and collaboration software.
• IT Management Software: This includes IT software that is used exclusively for IT functions including network, systems, storage and asset
management, training and computerbased training (CBT) software as well as security software (antivirus, personal firewall, encryption, etc.) as
well as mobile device management which offers software distribution, policy management, inventory management, security management and
service management for smartphones and media tablets... This also includes supporting a hosted virtual desktop (HVD) installation.
Disaster Recovery
• Annual costs of hardware, software, connectivity, occupancy and contracts specifically dedicated to disaster recovery for enduser computing.
Occupancy
• Occupancy costs should include fully burdened costs for the facilities being used by the staff supporting the enduser computing environment.
Some examples include office space, furniture, electricity, maintenance, property taxes, security and office supplies.
Personnel
administration.
IT Service Desk
Hardware
• PBX, ACD, interactive voice response, computertelephony integration, IT service desk enduser computing devices, and IT service desk
application servers.
Software
• This includes all software that is necessary to operate the service desk, such as expert knowledge tools, problem management tools, quality
monitoring, selfservice, workforce management software, workflow management software and service desk management portal software.
Transmission
• Includes inbound 800 service, dedicated trunking, local service, outbound long distance, internet access (for example, IT service desk portal)
and networking between IT service desks.
Disaster Recovery
• Annual costs of hardware, software, connectivity, occupancy and contracts specifically dedicated to disaster recovery for IT service desk.
Occupancy
• Facilities/occupancy: Includes lease, depreciation, rent, capital costs, transaction costs, operating expenses, repairs and maintenance, utility
charges, insurance, taxes, construction and reconstruction of work settings.
• Furniture: Includes costs for furniture and office equipment (other than IT assets such as PCs, servers and telecommunications equipment).
Personnel
• IT service desk agent operations/maintenance, engineering technical services, planning and process management, service administration,
management and administration.
Network
Note: Network includes Voice (WAV & VPT) and Data (WAN, LAN and IAS) network as well as dedicated cellular (mobile) network costs.
• WAN: Connectivity and transmission of businesscritical data between enterprise locations and business partners
• LAN: Accounts for the provisioning of communications and connectivity to critical business systems within enterprise sites and campuses
(Note: Costs associated with permanent building cabling, horizontal and vertical, are excluded. Likewise, costs for any interbuilding cabling —
copper and/or fiber — that would be found on a campus are also excluded.)
• IAS: Internet Access Services (IAS): Enterprise access to the global internet, for the use of its personnel and for the use of its external
customers to access enterprise websites.
Hardware
• Widearea voice network hardware: Switching and routing, as well as terminating hardware. Terminating hardware includes microwave,
satellite, compression, multiplexer/channel bank, PBX network interface card and channel service unit/data service unit (CSU/DSU).
• Voice premise: Telephone system equipment (such as voice switch/server and peripherals, including modules and uninterruptible power
supply [UPS]), premise system phones (voice only; smartphones such as BlackBerry, iPhone and Androidbased devices are excluded and
• Facilities/occupancy: Includes lease, depreciation, rent, capital costs, transaction costs, operating expenses, repairs and maintenance, utility
charges, insurance, taxes, construction and reconstruction of work settings.
• Furniture: Includes costs for furniture and office equipment (other than IT assets such as PCs, servers and telecommunications equipment).
Personnel
• IT service desk agent operations/maintenance, engineering technical services, planning and process management, service administration,
management and administration.
Network
Note: Network includes Voice (WAV & VPT) and Data (WAN, LAN and IAS) network as well as dedicated cellular (mobile) network costs.
• WAN: Connectivity and transmission of businesscritical data between enterprise locations and business partners
• LAN: Accounts for the provisioning of communications and connectivity to critical business systems within enterprise sites and campuses
(Note: Costs associated with permanent building cabling, horizontal and vertical, are excluded. Likewise, costs for any interbuilding cabling —
copper and/or fiber — that would be found on a campus are also excluded.)
• IAS: Internet Access Services (IAS): Enterprise access to the global internet, for the use of its personnel and for the use of its external
customers to access enterprise websites.
Hardware
• Widearea voice network hardware: Switching and routing, as well as terminating hardware. Terminating hardware includes microwave,
satellite, compression, multiplexer/channel bank, PBX network interface card and channel service unit/data service unit (CSU/DSU).
• Voice premise: Telephone system equipment (such as voice switch/server and peripherals, including modules and uninterruptible power
supply [UPS]), premise system phones (voice only; smartphones such as BlackBerry, iPhone and Androidbased devices are excluded and
should be allocated to the enduser computing environment), voice mail hardware (for example, processors and storage) and message
authentication control (MAC) materials.
• Security hardware: Dedicated data network firewall hardware/servers, intrusion/detection servers and devices, as well as encryption
hardware.
• NOC hardware: This includes hardware that is located within a NOC to support a centrally managed network infrastructure/network. This
includes test equipment and remote monitoring equipment, client devices (PCs on NOC desktops) and network management servers (NOCs).
• Switching, routing and wireless hardware, including switches and routers, multiplexers, satellite equipment, boundary (branch) routers,
backbone routers and bridges, and wireless access points.
• Other dedicated data network hardware, including Domain Name System (DNS) and Dynamic Host Configuration Protocol (DHCP) servers,
optimization equipment such as internet loadbalancing hardware, UPS, MAC hardware and MAC cable (closet to desktop).
Software
• Switch/voice server and peripherals (e.g., automatic call distribution [ACD], voice response unit [VRU]) and voice mail software costs.
• Security software: Dedicated data network firewall software, intrusion/detection software as well as encryption software.
• NOC software: All NSM software costs related to the NOC's support of the data network infrastructure/network.
Transmission
• Includes all outbound and inbound transmission costs. It also includes the annual cost for local central office lines (where applicable) as well as
cellular (mobile) transmission costs.
• Annual data network transmission costs, such as carrier digital services including Frame Relay access, ports and PVCs (Permanent Virtual
Circuits), ATM (Asynchronous Transfer Mode) access, ports and PVCs, MPLS (Multiprotocol Label Switching) access, ports, and CARs
(Committed Access Rates) which also includes specific charges for Quality of Service (QoS) commitments, sometimes referred to as traffic
shaping, T3/E3, dial backup service, Synchronous Optical Network (SONET), metropolitan Ethernet, and dark fiber, as well as annual cost for
circuits connected to the internet service provider and cellular (mobile) data transmission costs.
Disaster Recovery
• Disaster recovery contracts (communications) for hot sites (shell facilities), dedicated hardware, software, and connectivity.
Occupancy (For Personnel Only)
• These costs should include fully burdened costs for the facilities being used by the staff supporting the network. Some examples include office
space, furniture, electricity, maintenance, property taxes, security and office supplies.
Personnel
administration.
Applications
Application Development
• New code for a new application and functional enhancements to the current code that take more than two personweeks, or that typically add
eight function points or more. A "functional enhancement" is defined as "a change made for a user that allows additional capabilities (from a
business point of view) that were not there before. In some environments, major enhancements can actually be added in less than two person
weeks. If this is the case, and eight function points or more are added (about 800 lines of COBOL or 300 lines of a database language), then
this is still categorized as development.
Application Support
• Bug fixes of any size or duration, maintenance of hardcoded data or tables (including field size changes) embedded within the programs (any
size or duration), and functional enhancements to current code that take less than two personweeks and typically add fewer than eight function
points, or any project that produces no new business functionality for the user.
• A "functional enhancement" is defined as "a change made for a user that allows additional capabilities (from a business point of view) that
were not there before." In some environments, major enhancements can actually can be added in less than two personweeks. If this is the
case, and more than eight function points or more are added (about 800 lines of COBOL or 300 lines of a database language), then this
enhancement is recorded as a project, marked as an enhancement and categorized as development rather than support.
Hardware
• This includes only hardware (mainframes, servers, enduser computing devices) used by the application development or support staff
members to do their jobs (that is, client devices as well as servers and a portion of the mainframe used for application development and
testing). This excludes enduser or production hardware.
Software
Disaster Recovery
• Disaster recovery contracts (communications) for hot sites (shell facilities), dedicated hardware, software, and connectivity.
Occupancy (For Personnel Only)
• These costs should include fully burdened costs for the facilities being used by the staff supporting the network. Some examples include office
space, furniture, electricity, maintenance, property taxes, security and office supplies.
Personnel
administration.
Applications
Application Development
• New code for a new application and functional enhancements to the current code that take more than two personweeks, or that typically add
eight function points or more. A "functional enhancement" is defined as "a change made for a user that allows additional capabilities (from a
business point of view) that were not there before. In some environments, major enhancements can actually be added in less than two person
weeks. If this is the case, and eight function points or more are added (about 800 lines of COBOL or 300 lines of a database language), then
this is still categorized as development.
Application Support
• Bug fixes of any size or duration, maintenance of hardcoded data or tables (including field size changes) embedded within the programs (any
size or duration), and functional enhancements to current code that take less than two personweeks and typically add fewer than eight function
points, or any project that produces no new business functionality for the user.
• A "functional enhancement" is defined as "a change made for a user that allows additional capabilities (from a business point of view) that
were not there before." In some environments, major enhancements can actually can be added in less than two personweeks. If this is the
case, and more than eight function points or more are added (about 800 lines of COBOL or 300 lines of a database language), then this
enhancement is recorded as a project, marked as an enhancement and categorized as development rather than support.
Hardware
• This includes only hardware (mainframes, servers, enduser computing devices) used by the application development or support staff
members to do their jobs (that is, client devices as well as servers and a portion of the mainframe used for application development and
testing). This excludes enduser or production hardware.
Software
• Development and support software required by the application development and support staff members to do their jobs. It may include the
languages/compilers/databases, development/testing tools and IT management software tools, such as project estimators and project
schedulers.
• Business functionality software: For application support, this includes the maintenance cost of offtheshelf vendor packages, as well the
annualized cost of the software.
Occupancy
• Fully burdened costs for the facilities used by the development or support staff and included in this analysis view. Some examples would
include office space, furniture, electricity, maintenance, property taxes, security and office supplies.
Personnel
• Application development: This includes staff involved in developing new applications, enhancing existing applications, installing new
packages and installing major functional enhancements to existing packages.
• Application support: This includes staff involved in supporting applications that exist within the current portfolio. It also includes personnel who
are responsible for fixing programming problems uncovered when applications are running in production. It does not include any personnel who
are responsible for running the production applications. If an upgrade for a packaged application primarily contains fixes for existing problems,
then the efforts involved in installing such a maintenance upgrade are included in application support.
Corporate IT Management
Only include functions that are at a level within the IT organization that, after best effort, cannot be allocated to an IT functional area."
Office of the CIO/CTO
• This includes the "Clevel" IT management, including the CIO and CTO functions. Also included here are the direct reports of the CIO, who
spend the majority of their time providing enterprisewide support other than the functions outlined below (that is, special projects).
IT Human Resources
• This includes resources dedicated to human resource issues surrounding the recruiting and retention of IT staff.
IT Marketing
• This includes resources dedicated to marketing the capabilities of the IT organization to the business units.
Technology Planning and Process Management
• This includes activities related to the planning for and management of current and future technology needs, and the establishment of policies
and processes relating to technology. This also includes, but is not limited to, systems research, product management, technology evaluation
and purchase decision making, the establishment of processes surrounding security and virus protection, and business continuity/recovery.
Disaster Recovery
• This includes resources dedicated to planning, testing and implementing contingency procedures across all IT functions. This also includes
the staff dedicated to safeguarding the enterprise's ability to continue operations of vital business functions following physical damage or other
catastrophes that impact business facilities. Responsibilities include:
• Maintaining disaster recovery documentation
• Negotiating contingency site arrangements and serving as liaison with the vendor
• Managing offsite data retention
Security
• This includes resources that oversee the development of standards and procedures for ensuring overall network and systems integrity.
IT Finance and Administration
Only include functions that are at a level within the IT organization that, after best effort, cannot be allocated to an IT functional area.
IT Administration
• Fully burdened costs for the facilities used by the development or support staff and included in this analysis view. Some examples would
include office space, furniture, electricity, maintenance, property taxes, security and office supplies.
Personnel
• Application development: This includes staff involved in developing new applications, enhancing existing applications, installing new
packages and installing major functional enhancements to existing packages.
• Application support: This includes staff involved in supporting applications that exist within the current portfolio. It also includes personnel who
are responsible for fixing programming problems uncovered when applications are running in production. It does not include any personnel who
are responsible for running the production applications. If an upgrade for a packaged application primarily contains fixes for existing problems,
then the efforts involved in installing such a maintenance upgrade are included in application support.
Corporate IT Management
Only include functions that are at a level within the IT organization that, after best effort, cannot be allocated to an IT functional area."
Office of the CIO/CTO
• This includes the "Clevel" IT management, including the CIO and CTO functions. Also included here are the direct reports of the CIO, who
spend the majority of their time providing enterprisewide support other than the functions outlined below (that is, special projects).
IT Human Resources
• This includes resources dedicated to human resource issues surrounding the recruiting and retention of IT staff.
IT Marketing
• This includes resources dedicated to marketing the capabilities of the IT organization to the business units.
Technology Planning and Process Management
• This includes activities related to the planning for and management of current and future technology needs, and the establishment of policies
and processes relating to technology. This also includes, but is not limited to, systems research, product management, technology evaluation
and purchase decision making, the establishment of processes surrounding security and virus protection, and business continuity/recovery.
Disaster Recovery
• This includes resources dedicated to planning, testing and implementing contingency procedures across all IT functions. This also includes
the staff dedicated to safeguarding the enterprise's ability to continue operations of vital business functions following physical damage or other
catastrophes that impact business facilities. Responsibilities include:
• Maintaining disaster recovery documentation
• Negotiating contingency site arrangements and serving as liaison with the vendor
• Managing offsite data retention
Security
• This includes resources that oversee the development of standards and procedures for ensuring overall network and systems integrity.
IT Finance and Administration
Only include functions that are at a level within the IT organization that, after best effort, cannot be allocated to an IT functional area.
IT Administration
• This includes direct administrative and clerical support to enterpriselevel IT. Positions include secretary, receptionist and administrative
assistant.
Budget and Chargeback
• This area establishes the overall IT budget, monitors actual expenses versus the budget, arranges financing for purchases and performs
financial reporting to other enterprise areas. Staff members also handle the operation of the chargeback system. Positions include financial
analyst and chargeback administrator.
Asset Management
• Tracking: This area provides the administrative support for tracking systems and system components. It accounts for labor and contract costs
for managing depreciation records and lease contracts, performing asset inventories (physical or automatic management), asset identification
and tracking, asset database management, change recording and reconciliation. It also includes the creation and maintenance of an uptodate
record of installations, moves, adds, changes, removals and final disposal of all assets (for example, hardware, software and circuits). The
record contains information for locating, assessing, auditing, troubleshooting, counting and assigning assets, or performing other technical and
business functions without the need to repeatedly visit the asset location or reassemble data records. It also includes the determination of an
asset's useful life, including planning for the installation, upgrade, and removal/disposal of the asset and executing the plan.
• Procurement: This area solicits bids, negotiates purchasing agreements, establishes purchase orders, validates vendors' bills, coordinates
with accounts payable for payments and handles contract administration.
Quality Assurance
• This includes staff responsibility for monitoring, tracking and recommending solutions for improving the content and delivery of services
provided by the customer service contact center.
Training
• This refers to the primary source for the delivery of training within the IT organization and for end users in the business units. This area may
also prepare the training materials, evaluate employee skills and assist in the creation of custom training programs for the organization.

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This ITBudget report was created for Jamie Guevara on 14­Mar­17.

Input Currency: USD 2016 2017 2018

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Example Organiza on Healthcare Providers Insurance

Example Organiza on Healthcare Providers Insurance

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IT Spending Distribu on: Hardware, So ware, Personnel, Outsourcing

Distribu on of IT Spending, by IT Func onal Area

Distribu on of IT Spending, by IT Func onal Area

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Distribu on of IT Staﬀ, by IT Func onal Area

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Distribu on of IT Staﬀ, by IT Func onal Area

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IT Spending Distribu on: Hardware, So ware, Personnel, Outsourcing

IT Spending Distribu on: Hardware, So ware, Personnel, Outsourcing

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This ITBudget report was created for Jamie Guevara on 14Mar17.