Benchmarking – Strategic Initiatives and Optimized Efficiency

Benchmark analyses have proven to be a valuable tool in assessing performance (price, cost, quality, etc.). Specific to outsourced environments, benchmarks are used either for internal research or as a contractual mandate to assess existing pricing and service quality relative to comparable industry standards.

While benchmarks are a well-established historical practice, they are by no means obsolete. Indeed, benchmarks remain highly relevant to today’s dynamic and rapidly changing business requirements.

For one thing, as outsourcing deals become less about tactical cost-reduction moves and more about transformational change initiatives, the role of benchmarks has changed fundamentally. Rather than focus on specific service areas, benchmarks are being applied to provide insight into how well service bundles align with emerging trends, and to address and measure more strategic issues.

Benchmarks are also essential to building a business case for transformation, as they can show the cost of eliminating constraints and quantify the cost of “business as usual,” so the organization can justify key transformational changes.

As businesses move increasingly toward consumption-based utility pricing, benchmarks can help provide visibility into how organizations use IT resources and define incentives to manage consumption. This linkage is key, and paves the way for IT performance to be tied to business strategy. So if a business unit makes an investment in an IT solution as part of an overall strategic plan to grow the business, the ability to measure IT consumption will provide visibility into what extent that investment is contributing to the business goal

Finally, benchmarking can effectively complement emerging best practices to optimized efficiency, such as with managed services. As illustrated by the chart on the left, the combination of pricing discipline provided by a benchmark, together with process improvement and optimized governance, yields significant savings.

While traditional benchmarks focused on existing operations still have a role to play, a broader approach to benchmarking is gaining increasing attention. More and more clients are looking for the next evolution in service provision, and business as usual is not an option.

About the author

For over 30 years senior executives have benefited from Mr. Linnell’s knowledge and guidance in information technology (IT) in his role as Account Director. Vern is among ISG's most experienced business development executives and has extensive expertise including the management and communication of strategic requirements. Vern’s clients benefit from his long-term experience in assessment and sourcing services spanning all industries and models.