Most IT Organizations Waste 15 Percent of Their Budget or More

BOSTON, MA - November 9, 2004 Despite constant scrutiny, most IT organizations misallocate 15 to
25 percent of their IT budget, according to a new report by Aberdeen Group.

The largest pressure facing IT organizations is demand for new function, but the dominant response to that demand is cost cutting. But according to the report, this inappropriate response is the most striking evidence of the lack of alignment with wider corporate strategies that most firms suffer. The report further found that leading firms re-frame the pressures and address the underlying issue.

"You can't save yourself into prosperity," said Bill Malik, Aberdeen's vice president of technology research and author of the report. "Best-in-class enterprises focus on more strategic alignment, while
laggard enterprises are fixed on cost reduction. This puts the right emphasis on the root cause, rather than the obvious symptom of strategic misalignment. As a result, best-in-class enterprises are able
to deliver higher levels of responsiveness at lower cost - and with higher levels of customer satisfaction - than laggards."

The "IT Spending Trends Benchmark Report" indicates that while everyone faces cost pressures and user demands for new function, leading firms solve both problems by developing business-relevant metrics, recovering their cost based on IT's value to the end users, and actively participating in setting and executing firm-wide strategies.

To optimize IT spending, Aberdeen Group recommends the following:

• Develop consistent, firm-wide business relevant metrics for IT performance
• Deploy service level objectives developed with end users firm-wide
• Recover cost based on customer satisfaction
• Sustain alignment with ongoing joint strategic planning
• Consider a portfolio approach to manage IT cost

This report, as well as Aberdeen 's entire research library, is available to members of AberdeenAccess. For more information visit www.aberdeen.com, or call 617-854-5250.

About Aberdeen Group
Founded in 1988, Aberdeen Group Inc. is the trusted adviser to the global business executive for value chain strategies and business advice.