The magic number: The IT percentage that reduces costs and increases capability in consumer products

Published: September 9, 2008

Executive summary

The IT organization in many companies increasingly finds itself caught between opposing imperatives — being encouraged to provide greater support to the business while being ordered to cut costs. This is particularly true in the consumer packaged goods (CPG) industry, in which a number of factors are leading companies to ask IT to do more with less: economic pressures, the fragmentation of the customer base, and shorter product life cycles. In response, some IT organizations have already begun to pursue lower cost structures, but blindly targeting a particular spending level may ignore critical business needs. Every company must determine its own “magic number” — the percentage of revenue that should be devoted to IT spending — and learn to build the capabilities it needs for growth while keeping costs down. An IT organization that can transform its operating model to act as both a cost center and a strategic enabler will be poised to meet future business needs.

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The magic number: The IT percentage that reduces costs and increases capability in consumer products