Aligning to the Investment "Sweet Spot"
Tech Intensity1 is a phrase Rubin Worldwide has coined that refers to the level of
technology spending as it relates to business results, both as a percentage of revenues
and as a percent of operating expenses. Measuring IT spending against operating expense
and net revenue is a more accurate measure of spending levels than the traditional metric
most companies use of measuring IT spending against net revenue alone, particularly in
turbulent market conditions.
The Tech Intensity curve is a trend that can be observed by comparing organizations'
IT intensity metrics to their profitability. Increased IT intensity often correlates
to improved profitability until a certain point, when returns actually begin to decline.
The Tech Intensity curve can help organizations determine how their spending and
performance aligns to industry averages and their own historical investments and
financial results, allowing organizations to see how their investments map to optimal
results on the curve - the point at which investments show the highest returns.
Organizations can use information about the gaps between their results and the optimal
state to focus IT planning, to increase IT spending in support of improved business
performance or scale back or maintain IT investments to support revised performance
results or plans.
While the causality of these relationships may not be clear, CIOs need to understand
where their investments align with industry peers and their organizational history.
By aligning business profitability to IT spending levels, organizations can more
accurately anticipate their resource requirements in changing market conditions.