Return on Investment
Strategy and Operating Models are vital for all companies at scale, but the only tools available today are Outlook, Excel, and PowerPoint. The process is expensive, costing ~£1.2M/year when attempted end-to-end with in-house experts, and more with outside firms. It is manual, slow, and error-prone. Moreover, the business usually fails to reach its target end-state (per KPMG, McKinsey, Bain, PwC, others). The impact is 5% off the P&L, never realized (per Accenture).
Investment in the Xirocco platform is dedicated 100% to creating, improving, aligning, accelerating, and monitoring the successful execution of the Group and Business Unit IT Strategies.
The table below shows the costs of creating an IT Strategy for a typical midmarket company1 using traditional processes with MS Office and using an external advisory.
IT Strategy using traditional processes and internal talent
|Effort to create a holistic, business-linked IT Strategy 2||£1.20m 3|
|Effort to update IT Strategy each year for next 2 years (80% of original cost per update)||£1.73m|
|Total cost over 3 years||£2.93m|
|Mandatory quarterly strategy reviews with real-time refinements||Impractical|
IT Strategy using external advisories
|Effort to create a holistic, business-linked IT Strategy 3 consultants, 6 weeks onsite for one single strategy artifact at one point in time||£300k 5|
|On average 6 significant artefacts in an IT Strategy||£1.80m|
|Total cost over 3 years||£5.4m|
|Mandatory quarterly strategy reviews with real-time refinements||Prohibitively expensive|
Additionally, an incomplete IT Strategy can fail to add as much as £8m4 to the bottomline of this £1b company.
Assumptions and underlying data:
Typical midmarket company used here for ROI calculation is circa £1billion revenues, 3 Business Units, multi-geography presence and standard IT department with 5 functions.
IT Strategy includes (at Board-level): IT Current State Assessment, Business Strategy, Business-IT Alignment, Portfolio Optimisation, Technology Strategy, IT Operating Model, IT Sourcing Strategy, and IT Investment Planning. Scope takes approximately 1 year to deliver (based on industry benchmark), using internal talent and Microsoft Office.
Typical benchmark effort of £1.2m for IT Strategy creation with internal expertise, using a standard blended rate of £600 per day. Contact us if you need further information on this.
Accenture Research “An effective IT Strategy can increase the enterprise’s bottom line by as much as 5%”. Average bottomline across Fortune/FTSE cos is 16% or revenues (FT.com), so bottomline boost by 5% for every £1b revenues is (£1b*0.16*0.05) = £8m.
Conservative estimates for IT Strategy creation with outside firms almost equal (Point 3 above) or more, using commonly available industry benchmarks.
In comparison, investment in Xirocco Subscription and the 10x process acceleration enabled by Xirocco will yield significant cost reductions and efficiencies immediately and payback even more over the course of three years. Contact us for full ROI figures.