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Four Information Technology Success Factors Drive 5X Revenue Growth for Best in Class

Recent research from the InterUnity Group captures four Critical Success Factors employed by Best in Class Companies to maximize corporate performance

Concord, MA (December 9, 2003) —InterUnity Group studied 500 companies in 24 industries from the InterUnity 600 Knowledgebase and found four Critical Success Factors employed by Best in Class Companies to drive market leading value from their Information Technology investments.

“The Best in Class companies significantly outperformed the median. They grew 5 times faster, were almost twice as profitable, and have a market cap price to sales ratio that is 70% higher than the median” according to Dr. Richard Sneider, Managing Director of the InterUnity Group. Often cited as IT leaders within their respective industries, these companies include Northern Trust, Dell, Arrow Electronics, and Aetna.

The research provides insight into how Best in Class companies achieve superior business performance. The report provides executives with a framework to identify and prioritize new initiatives that can dramatically improve the business value of their IT investments.

Selected findings from the report include:

1. There are optimal “bands” of IT spending that vary by industry

IT expenditures averaged 4% overall and ranged from 1% to 11% depending on the industry. While it has been recognized that faster growing and more profitable companies spend a higher percentage of revenue on IT, the return varies greatly at each investment level, depending on the other Critical Success Factors.

2. The relative size of IT staff drives profitability

Best in Class companies average 45% larger IT staffs per $B of revenue. Best in Class also deploy these resources differently, using more packaged software and focusing more resources on tailoring applications to specific business requirements. The study also analyzed the impact of outsourcing on corporate performance.

3. Business Unit - IT Partnership is a key driver of IT effectiveness

Fostering Business Unit - IT Partnership is critical to IT effectiveness. Companies with higher levels of partnership are significantly more profitable and are growing faster. Researchers also found that IT governance and demand management can have a positive or a negative effect on overall corporate performance depending on the level of partnership.

4. Best in Class companies are early and effective users of new technologies within their respective industries

While many technologies have specific industry impact, the top three technologies with the greatest proven cross industry impact on corporate performance are CRM, Supply Chain Management, and Business Intelligence. The relative impact of these applications varies with the corporate environment and the industry. CRM, for example, has the greatest impact in high collaboration environments.

More Information

A summary of the study is available on the InterUnity Group website, http://www.interunitygroup.com.

Methodology

The report was created using the InterUnity 600 Knowledgebase, a comparative database of 600+ companies exceeding $1B in annual revenues, across 24 industry groups. Over 135 Business Performance and Information Technology characteristics are monitored, and updated quarterly. “Best in class,” as used in this report, is defined as the top 20% in annual percentage revenue growth rate.

Charts

Figure 1 – Best in Class Corporate Performance versus Median

Performance Parameter Best in Class Median
Revenue Growth 48% 9%
Profitability 9% 5%
Price to Sales Ratio 1.49 .87
IT employees per $B Revenue 140 100


Figure 2 (Available) – IT Budget as a Percentage of Revenue versus Profitability and Revenue Growth
Figure 3 (Available) – Top Technology Drivers Associated with Corporate Performance