User Costs Said To Be Better Predictor Of Tech Spending - InformationWeek

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User Costs Said To Be Better Predictor Of Tech Spending

In the bestseller "Moneyball," Michael Lewis tells how Oakland A's general manager Billy Beane defies convention by judging a player's worth based on his on-base percentage rather than his batting average. Beane often signs players who are as productive on the base paths as the superstars at a fraction of the cost.

Scott Holland, director of IT research at the Hackett Group, sees a link between baseball and business when it comes to assessing value. Measurements such as IT spending per employee or as a percentage of sales don't always tell much about technology's true value to a company. Not all employees use technology. Companies hire consultants who are heavy technology users but don't show up in the per-employee value equation. "Theoretically, the number of users can be greater than the number of employees," Holland says. IT spending as a percentage of revenue can fluctuate year to year, and most companies don't want their IT spending to waver annually.

IT cost per user lets companies include business partners who do some computing on the host company's systems, and people at factory-floor workstations and automatic teller machines. Spending per user lets companies identify the efficiencies IT provides.

University of Michigan professor M.S. Krishnan says cost per user is a more accurate predictor of spending. Still, he says, it's one tool among many that provides information managers need to make smart decisions.

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