What is the average IS budget by percentage of sales?

[Guest.Visitor]

I am trying to find documentation by industry that shows the average IS budget by percentage of sales. I usually run right around 1% and am asking for 1.5% this year. I think these are low numbers, but I don't have anything to support that! Has anyone seen anything?? Thanks, Joe.

[Guest.Visitor]

In my experience the percentages vary greatly by industry. Example Telecom and Banks are very high, Retailers very low. Its been a while since I've bothered to track the trends and I dont have direct access to the information anymore. The way the industries treat IT is also very different. For example prior to the internet fest, a retailer would focus on how to reduce 1.5% to 1.2%. I havent worked with retailers for over 4 years but I suspect their spend percentage changed. Bankers on the other hand spend more since they tend to see more value at a direct level. Thats only to be expected since Banking is dealing in synthetic products while retailers and manufacturers have physical products. So if your business is retailing the percentage might be about right (although to be honest I cant remember if the percentages were based on expense or sales ). IBM consultants/sales in the industry vertical did have access to this type of information. Its was part of their benchmarking service - designed to see how effective is your IT. You can also find industry consulting companies who will sell you market trend data Example <a > href="http://www.towergroup.com/pages/retail.asp"> Tower Group </a> or <a > href="http://www.market-reports.co.uk/acatalog/mp52138.html"> Report Finder</a> David

[Guest.Visitor]

I think it would depend on the type of business; At amazon.com it's probably somewhere around 10,000% of sales. AT a traditional 'green tube' company I think it would be in the low single digits. Also, because expenses are generally within an order of magnitude of sales, it doesn't make a lot of difference how you base the IT expense. Just curious; why the 50% increase? New e or i 400 maybe ; or moving to ORACLE? Bobh

[Guest.Visitor]

Joseph, Why do you feel that your budget should represent a certain percentage of sales, are sales in your organization driven by IT? Can you show that a larger budget will allow you to add value? Cost reduction may be another reason to justify an increase. Budgets are definately not my area of expertise, but the book "Information Productivity : Assessing Information Management Costs of U. S. Corporations" helped me to form a better argument. This book is by a Paul Strassmann, he has written several others that I also found useful. David Morris

[Guest.Visitor]

The 50% increase is due to two primary factors. Requesting 4 new staff positions and our annual maintenance for JBA/Geac System 21 was previously prepaid in our lease and is coming due next year. This will be the first year it comes out of my budget! Ouch!

[Guest.Visitor]

Thanks for the tips. BTW, my company is a manufacturing company supplier to aftermarket and automotive OEM.

[Guest.Visitor]

Trust me, I don't think my budget should be based on sales.... but those finance guys love to crunch numbers!! My company is quite progressive thinking and not too worried about my capital expenditures, but they sure get stuck on the SG&A. I have ordered the book you recommended and hope it provides some ammunition to combat the red pen of finance!

[Guest.Visitor]

Joseph, I think you will find the book useful. It contains comparisons based on different metrics for most major US corporations. For the most part the comparisons are based on publicly available financial data (which can be verified by your finance guys). You may find some statistical information in Computerworld, I know that Paul Gillin who is now at techtarget.com, used to do an anual survey. David Morris