Digital World Class® technology organizations deliver far greater value than their peers and are more resilient and better able to navigate uncertainty, while also spending 18% less and operating with 27% fewer staff, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT).
The Hackett Group® found that while typical companies have seen technology operating costs as a percentage of end-user equivalent increase by 23% over the past 10 years, Digital World Class technology organizations have seen only a 16% cost increase. The research showed that their overall reduced IT costs generate a $37 million annual advantage (for a typical $10 billion company). They are also able to modernize their technology landscape through digital transformation, implementing intelligent automation, advanced analytics, cloud enablement and collaborative tools, which enable them to spend 45% less than typical companies on IT outsourcing and further reduce labor costs. Overall, their discipline and ability to maintain strategic focus allows them to adapt more rapidly to changing circumstances. By harnessing data more effectively, they can make better decisions and focus on areas that matter most, such as managing costs, without sacrificing long-term IT strategy and goals.
A public version of the research, “Resilience: The Digital World Class Technology Advantage,” is available free, with registration, at https://go.poweredbyhackett.com/rdwcatech2306sm. It contains nearly 40 metrics detailing the performance gap between Digital World Class technology organizations and their peers – plus six key areas where Digital World Class companies excel and a proposed action plan to close the gap.
The Hackett Group’s research answered the question as to why companies aspire to Digital World Class by highlighting an undeniable correlation between Digital World Class status and improved overall enterprise performance. The data concluded that companies with at least one business services function operating at Digital World Class levels see a five-year average performance premium over their industry medians, including: an 80% improvement in net margin; 24% higher earnings before interest, taxes, depreciation and amortization margin; 89% greater return on equity; and 44% higher total shareholder return.
The Hackett Group defines Digital World Class organizations as those that achieve top-quartile performance in business value (a composite of stakeholder experience, digital enablement and traditional effectiveness metrics) and operational excellence (a composite of efficiency and business process automation metrics) in The Hackett Group’s comprehensive technology benchmark. The Digital World Class technology research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.
Beyond the cost and staffing advantages, Digital World Class technology organizations excel across a wide range of business value and operational excellence metrics. Here are some highlights:
- 2.9X more projects that deliver targeted return on investment
- 47% more perceived as a valued business partner and 29% more perceived as proactive by stakeholders
- 68% higher allocation of technology spend to emerging technologies
- 62% fewer applications per end user
- 66% more IT business intelligence reports distributed automatically or via self-service
Digital World Class technology organizations also spend very differently than their peers, investing 68% more of their spend to emerging technologies such as artificial intelligence (AI), workflow automation and more to drive operational effectiveness and productivity gains. This puts them in a better position to address the fact that growing workloads in the business functions are outpacing budgets and headcounts.
IT's role expands in business transformations that require implementing new technologies, streamlined processes and introducing innovative solutions, including generative AI, to drive efficiency and improve business outcomes. Many companies’ digital transformation efforts are already using generative AI to streamline operations, enhance customer experiences and drive business growth. IT organizations have also begun using generative AI to drive improvements in enterprise application development, deployment and management. IT leaders should also be fully involved in any adoption of generative AI technology across the revenue, operations and selling, general and administrative (SG&A) functions, to ensure that appropriate technology selection, training, security and ethics issues are addressed.
The Hackett Group Global IT Executive Advisory Program Practice Leader Tammy Pinter explained that, “While typical technology organizations may want to focus on value, they often don’t know where the value is in their organization. At the same time Digital World Class technology organizations are laser-focused on driving strategic advantage. They prioritize carefully, standardize processes consistently, and focus on end-to-end process design and ownership to eliminate inefficiency. This enables them to invest in key areas that can deliver the greatest return on investment. And they have rigorous governance in place to help make it happen.”
The Hackett Group Senior Director Prem Purushothamraj added that “Digital World Class technology organizations have significant advantages in terms of how they're able to achieve value. They're perceived as better business partners because of their ability to achieve targeted business outcomes. They deliver better customer and employee experiences and are perceived as better places to work. And finally, Digital World Class organizations show greater courage and initiative to foster innovation and make key investments, which enable their companies to more effectively compete in the marketplace.”
About The Hackett Group
The Hackett Group, Inc. (NASDAQ: HCKT) is a leading benchmarking, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class® performance.
Drawing upon our unparalleled intellectual property from more than 25,000 benchmark studies and our Hackett-Certified® best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of the DAX 40 and 52% of the FTSE 100 – captured through our leading benchmarking platform Quantum Leap® and our Digital Transformation Platform, we accelerate digital transformations, including enterprise cloud implementations.
The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap, Digital World Class and Hackett Value Matrix are the registered marks of The Hackett Group.
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