Dec 28 2011

The Case for Historical Benchmarking in IT — Quick Take

Is it better to measure your business goals against yourself or your peers?

When companies and organizations take assessments of themselves, they often tend to start by comparing themselves to their peers. If company B is a similar-sized company and in a similar industry to company A, then IT spends and budgets should be similar, the logic goes.

But Mark P. McDonald, a Gartner analyst, argues that companies should lean more toward historical benchmarking rather than solely looking at what peers are doing. Historical benchmarking is when a company sets and measures its goals based on its past performance. As McDonald writes, it’s essentially “marking yourself to yourself” rather than to the market.

One part of McDonald’s argument for historical benchmarking is that peer benchmarking is often used to look for reasons to reduce IT spending, but not used to find reasons to increase IT spending. Another issue is that peer metrics don’t demonstrate value as well as history-based metrics.

Comparing yourself to peers only tells you how different you are from everyone else. That can be helpful to know in situations where you have no idea of market performance. Knowing the gap does not create value. Value comes from changing your performance and demonstrating that change is the domain of a history-based benchmark.

Historical-based benchmarking gives your management systems information they can use. Tools like control charts or statistical process control (SPC) use changes in actual performance to drive decisions, actions and change all things that cannot be supported through peer benchmarking.

Read more about peer and historical benchmarking in McDonald’s post on the Gartner blog.