Digital world class technology organisations deliver more value

The Hackett Group® found that while typical companies have seen technology operating costs as a percentage of end-user equivalent increase by 23% over the past 10 years, a select group of - what Hackett calls “digital world class organisations” - have seen only a 16% cost increase. The research showed that their overall reduced IT costs generate a $37 million annual advantage (for a typical $10 billion company).

They are also able to modernise their technology landscape through digital transformation, implementing intelligent automation, advanced analytics, cloud enablement and collaborative tools, which enable them to spend 45% less than typical companies on IT outsourcing and further reduce labour costs. Overall, their discipline and ability to maintain strategic focus allows them to adapt more rapidly to changing circumstances. By harnessing data more effectively, they can make better decisions and focus on areas that matter most, such as managing costs, without sacrificing long-term IT strategy and goals.

The Hackett Group defines “digital world class organisations” as those that achieve top-quartile performance in business value (a composite of stakeholder experience, digital enablement and traditional effectiveness metrics) and operational excellence (a composite of efficiency and business process automation metrics) in its comprehensive technology benchmark. The research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.

A public version of the study, “Resilience: The Digital World Class Technology Advantage,” is available free, with registration, at https://go.poweredbyhackett.com/rdwcatech2306sm. It contains nearly 40 metrics detailing the performance gap between digitally advanced technology organisations and their peers – plus six key areas where these companies excel and a proposed action plan to close the gap.

Hackett’s research revealed an undeniable correlation between digitally world class status and improved overall enterprise performance. The data concluded that companies with at least one business services function operating at these levels see a five-year average performance premium over their industry medians, including: an 80% improvement in net margin; 24% higher earnings before interest, taxes, depreciation and amortisation margin; 89% greater return on equity; and 44% higher total shareholder return.

Beyond the cost and staffing advantages, the organisations excel across a wide range of business value and operational excellence metrics. Among the highlights:

• 2.9% more projects that deliver targeted return on investment

• 47% more perceived as a valued business partner and 29% more perceived as proactive by stakeholders

• 68% higher allocation of technology spend to emerging technologies

• 62% fewer applications per end user

• 66% more IT business intelligence reports distributed automatically or via self-service

The also spend very differently than their peers, investing 68% more in emerging technologies such as artificial intelligence (AI), workflow automation and more to drive operational effectiveness and productivity gains. This puts them in a better position to address the fact that growing workloads in the business functions are outpacing budgets and headcounts.

IT's role expands in business transformations that require implementing new technologies, streamlined processes and introducing innovative solutions, including generative AI, to drive efficiency and improve business outcomes. Many companies’ digital transformation efforts are already using generative AI to streamline operations, enhance customer experiences and drive business growth. IT organisations have also begun using generative AI to drive improvements in enterprise application development, deployment and management. IT leaders should also be fully involved in any adoption of generative AI technology across the revenue, operations and selling, general and administrative (SG&A) functions, to ensure that appropriate technology selection, training, security and ethics issues are addressed.

The Hackett Group Global IT Executive Advisory Program Practice Leader, Tammy Pinter, explained that, “While typical technology organisations may want to focus on value, they often don’t know where the value is in their organisation. At the same time, digital world class ones are laser-focused on driving strategic advantage. They prioritise carefully, standardise processes consistently and focus on end-to-end process design and ownership to eliminate inefficiency. This enables them to invest in key areas that can deliver the greatest return on investment. And they have rigorous governance in place to help make it happen.”

The Hackett Group Senior Director, Prem Purushothamraj, added that “Digital world class organisations have significant advantages in terms of how they're able to achieve value. They're perceived as better business partners because of their ability to achieve targeted business outcomes. They deliver better customer and employee experiences and are seen as better places to work. And finally, they show greater courage and initiative to foster innovation and make key investments, which enable their companies to compete in the marketplace more effectively.”