IN FOCUS
Putting it together
The methodology we use was originally developed at Scottish & Southern Energy plc and is called Integrated Operational Planning and Budgeting or IOPB for short.
The premise is simple:
Aim for a benchmarked position Determine the projects that are required to deliver the benefits to
achieve the benchmark Plan over sufficient timescales to
deliver the projects Build in the project benefits to the
forward plan showing the ‘glide path’ Fund successive elements of the programme by ring fencing portions of savings from preceding elements
The true skill comes in through
knowing the projects that need to be undertaken in the first place; this is where companies may need experienced help.
What to expect?
The following example comes from a client within the Financial Services sector. The company estimated that their
IT spend was in the order of 5% of turnover – normal for a business in this sector. When the figures were examined, it soon became apparent than not all IT spend had been included –depreciation and a few other costs had been omitted. The ‘IT accounts’ were reconstructed and total IT spend rose from £20m to £52.4m. This was a staggering increase – 13% of turnover spent on IT rather than 5% – far too much. A workshop was held and each line
analysed. It was soon realised that the major cause of the overspend was a completely uncontrolled approach to projects. Business cases were not subjected to financial ‘hurdle rates’ and no mechanism existed to track the benefits upon which the projects were originally justified. In addition to this, the client operated a 95% in-bound call centre. Introducing a revenue sharing telephony scheme would add 50p to each customer’s annual costs but would significantly
28 NETCOMMS Volume I, Issue 4 2011 Description Staff Costs Maintenance Communications Depreciation Total IT Costs Total Capital Projects Percentage of Turnover on IT
Proportion of IT Spend on Projects
Number of IT Staff per 1,000 Users
IT Spend per User
Year 1 £M
11.4 10.7 2.3 28.0 52.4 15.0 10.9% 35.4% 135
Year 2 £M
10.2 8.6 1.0 22.0 41.8 7.0 8.7% 23.5% 123
Year 3 £M
9.0 7.5 0.0 16.0 32.5 7.0 6.8% 26.42% 111
Year 4 £M
9.0 5.0 0.0 10.0 24.0 7.0 5.0% 29.1% 111 £19500 £15700 £12400 £9100
reduce the communications costs. The actions that needed to be taken
were identified and the high level plan above was put together. This client was losing £20m per
year. The effects of putting these recommendations into practice would turn that loss into a profit of £8.4m.
Where to get help?
There are various places you can go to get useful benchmarking data and advice. All the major consultancies offer a ‘Benchmarking Service’ although you will have to make up your own mind about how many ticks they get in the boxes. Other useful sources of benchmarking data include: Trade Associations, which are usually free to
members; The National Computing Centre, which is excellent value for money; IT Advisory Companies, which are typically very expensive and of limited practical use; Company auditors, which produce highly caveated reports with limited delivery capability; Kew Associates, which gives very targeted industry-specific data. It is up to you to decide which
approach gives you the biggest and quickest bang for your buck. Benchmarking can add real value to a company’s performance provided it is carried out properly and it does not have to be an expensive, painful or a drawn out experience. And don’t forget: benchmark to improve, not to stand still.
www.netcommseurope.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60