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Financial Services

Benchmarking - Case Study

The Background


CIO Plus were approached by a large online bank to benchmark their IT spend. The broad outline details that were given suggested that their IT spend, at 5% of turnover, was in line with normal expectations. CIO Plus scheduled a 1-day workshop to carry out the benchmark. 


The Problem


It soon became clear that not all the expenditure had been covered in the original briefing and when deprecation was included the total IT spend rose to over 10% of turnover, which was significantly above expected levels.


The Approach


A pro-forma approach was taken and experience allowed the underlying issues, and the corrective actions that needed to be taken, to be identified very quickly. A high level Integrated Operational Plan and Budget was constructed that set out, in order, the steps that needed to be taken to get the client from ‘where they were’ to ‘where they needed to be’.

The Solution
The major issues that needed to be addressed to achieve the desired state were:
  • Far too many non-value adding projects were being undertaken. Introduce a sensible hurdle rate/process that ensures a reasonable return and monitor to deliver the benefits
  • Depreciation would reduce in line with reduced capital projects
  • 90% inbound/10% outbound call centre. Introduce a revenue sharing approach to eliminate communication costs at approximately 50p per customer per year
  • Virtualise and consolidate servers to support multiple applications
  • Maintenance contracts would reduce in line server consolidation
  • Staff costs would reduce in line with server consolidation
  • A streamlined estate usually leads to service level improvements.

The Outcome


Extracts from the final report are shown below and you will note that only 4 metrics were considered appropriate to bring about a dramatic improvement in IT financial performance without any deterioration in service levels.


Implementing the recommendations set out above made a significant positive impact on profitability and returned the client to within acceptable benchmark metric ranges.


NB: It was pointed out to the client that if they were prepared to write down their ‘surplus’ server estate, the increase in annual profitability could be taken much earlier.

The Conclusion


High level benchmarking coupled with the relevant experience can rapidly lead to dramatic improvements in operational and financial performance.

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