Technology plays an increasingly strategic role across industries. Global technology spending is expected to total $2.7 trillion in 2015 and to grow at 3.1% over the next five years. In many companies, IT is the single biggest contributor to general and administrative costs. For companies embarking on broad digital transformations and for whom aggressive cost management represents the most effective and efficient way to self-fund the expansion of their digital capabilities, IT spend is here to stay.
Every IT organization should investigate the potential of nonproprietary, open-source software as well as cloud computing. The key lies in the emphasis of the business value derived from technology spend and determining how effective the organization is able to extract it. Companies investing in new capabilities and reducing their technical debt may spend more than competitors—but they may be getting good value from it.
IT spending as a percentage of revenue may be a dubious metric, but measuring running costs against growing costs, as well as specific practices around offshoring, outsourcing and technology adoption, can be very instructive.