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How many people should be in a specific IT function? Benchmark data such as the percentage of IT people in an organisation or IT spending compared to revenue is useful, but it won't determine how much to spend or what the appropriate size of a specific group should be. IT organisations are made up of multiple parts; the size of each part is affected by various drivers differently.

To determine the drivers of the size of functions, Forrester combined the results of its staffing benchmark survey with the results of a study that analysed activities that affect the size of individual groups. We looked at 30 cost-reduction activities that have a direct impact on labor costs and consolidated these into three broad categories of full time employee (FTE) drivers. Based on our analysis, we found the following areas drive the size (and therefore the cost) of specific functions:

Driver 1 - Complexity in the business models and IT delivery means more staff.
Business complexity includes different business models, customer groups, cultures and products. For example, a company with a complex business model oriented toward both products and countries requires greater IT support than one with a simple business model. A multi-line insurer such as AXA with property/casualty, life, and investment business units will require disproportionately more IT support than a nonprofit such as the American Cancer Society whose processes are similar across different geographic entities. IT complexity refers to the number and variety of systems, IT processes, tools and geographies. In both cases, greater complexity results in more people required for development, deployment and, most importantly, support.

Driver 2 - The design of processes and project workload affect the size of support functions.
Obviously, increasing the volume, size, and complexity of projects creates greater demand for IT people. Similarly, redundant or poorly-designed IT processes increase the number of people running them or performing workarounds. These factors affect both applications and infrastructure organisations. For example, an infrastructure organisation that lacks efficient help desk processes that enable closing at least 70% of requests on the first call will increase the need for more help desk and second-level support people. Similarly, an applications organisation with poorly defined requirements definition will result in scope and other problems that will require greater effort to fix later in the project.

Driver 3 - Organisational structure and sourcing strategy will drastically change the size of IT functions.
A wide variety of organisational design decisions can drive up the number of people needed in specific functions. For example, application organisations that operate autonomously in support of business groups with similar IT needs drive up the number of people for development and maintenance. Similarly, sourcing decisions will change the number of people performing operational functions or providing governance. For example, hiring large numbers of contractors without oversight or an onboarding processes can increase the scope and complexity of projects. A Canadian provincial ministry allowed a dozen managers to hire contractors with little oversight. Each contractor had his own tools, methods, and style of working. As a result, the scope of projects increased dramatically and the poor integration of work products drove up the time and effort to do execute even simple projects.

Complexity is the dominant driver of size

Although every organisation is somewhat different, five functions are commonly seen as direct reports to a CIO. These are infrastructure, applications, project management, planning and architecture, and vendor management. In our research we looked at how the three primary drivers that we identified — 1) complexity; 2) projects and processes; and 3) structure and sourcing — influence the size of these five core IT groups. What we found is that, the number and variety of products, customers, systems, tools, geographies, and other measures of complexity are the primary drivers of the necessary size of specific IT functions (below image).

When we looked at the impact of each driver on infrastructure and operations, our analysis showed that that complexity is the primary driver of size of these operational functions. The number and complexity of business processes, systems, tools, and geographies will drive up the numbers for both groups. For example, a company with siloed business units with duplicate business processes will require more applications and infrastructure support people.    

What it means

CIOs should use this information to identify the functions to focus on and the factors that drive the size of these groups up or down. With this information, they can understand the implications of adding or subtracting people. For example, understanding that the structure of the applications organisation is a significant driver of the number of people providing application development and maintenance services, CIOs can determine whether a restructuring is the right step, given cost reduction or other goals.

Marc Cecere is vice president and principal analyst at Forrester Research.