Benchmarks for Infrastructure Spending

Benchmarks for Infrastructure Spending in the
Midmarket
Published: 20 March 2014



Analyst(s): James A. Browning, Jamie K. Guevara
G00258754


Infrastructure accounts for more than 50% of most enterprise IT costs. This
report is designed to help midmarket IT leaders compare key infrastructure
spending with industry averages.



Key Findings
■
Security spend as a percent of IT costs in the midmarket was 5.5% in 2013, and security spend
per employee was $399.

■
Midsize enterprises spent about 9.0% of their IT budgets on data networking and 6.0% on
voice networking in 2013.

■
Midsize enterprises spent 7.2% of their IT budgets on storage and $3,335 per installed terabyte
in 2013.



Recommendations
■
Use benchmarking to compare your infrastructure costs with same-size and same-industry
peers. But realize that wholesale acceptance of industry average spending metrics does not
guarantee your investment levels are optimal.

■
Ascertain where and why your infrastructure spending is higher or lower than the industry
average. Review spending that is higher than industry averages as a cost-optimization
opportunity.

■
Examine IT spending in context to business performance using metrics such as revenue per
employee and income per employee. Aim to deliver a reasonably priced infrastructure that best
supports the business requirements, risk tolerance, performance and availability needs of your
organization. Prioritize infrastructure spending based on importance to the business.



Table of Contents

Analysis. ......................................................................................................................................................... 2
Security Spend in the Midmarket. ............................................................................................................ 3

Networking Spend in the Midmarket. ....................................................................................................... 3
Storage Spend in the Midmarket. ............................................................................................................ 4
Don't Settle for Average; Consider Business Requirements. .................................................................. 5
Gartner Recommended Reading. .................................................................................................................. 5
List of Tables

Table 1. Storage Deployed by Midsize Organizations Worldwide. ................................................................ 4




Analysis
Many midmarket organizations lack the financial transparency required to fully understand the costs
associated with delivering IT services, often because they lack the time and resources required to
actively report and analyze IT spending. Therefore, spending is often misaligned with the strategic
objectives of the organization. Given the non-revenue-generating nature of most infrastructure
expenditures, it is even more difficult to obtain funding for these solutions. If IT costs are identified,
tracked and well-understood, better IT investment decisions can be made. Financial accountability
and responsibility also develop business trust and drive efficiency.

Gartner has published research that contains industry averages and ranges for IT spending and
staffing in the midmarket; see "IT Key Metrics Data 2014: Small and Midsize Enterprise Executive
Summary." While these averages are indicative of IT spending levels in the midmarket, actual
spending will vary by industry, business scale and IT adoption profiles. Ultimately, this IT spending
and staffing information should be used as a high-level directional indicator and in the creation of
planning assumptions — not viewed as a prescriptive benchmark in which significant budget
decisions are made.

The purpose of this report is to expand on some critical IT spending metrics that were not disclosed
in the above-mentioned IT key metrics report. The IT metrics that are presented in this report
include:

■
Security spend as a percent of IT spend and security spend per employee

■
Data and voice network spend as a percentage of total IT spend

■
Storage spend as a percent of IT spend and storage cost per installed terabyte

Infrastructure costs typically comprise more than half of the IT budget. It is essential to know and
understand these costs, especially in the areas of security, networking and storage. In a recent
survey of midsize enterprises, security was cited as the No. 1 challenge for midmarket CIOs.
Storage growth and network performance were also in the top 10. Midmarket IT leaders can
estimate their total infrastructure costs by using a simple and easy-to-use Gartner Toolkit: "Toolkit:
A Quick and Easy-to-Use Cost Estimator for IT Infrastructure and Operations."
Gartner, Inc. | G00258754 Page 3 of 7




Security Spend in the Midmarket
Annual IT security spending in 2013 was approximately 5.1% of total IT spending, on average,
across all geographies, industries and company sizes. Midsize enterprises spent 5.5% of their IT
budgets on security in 2013. Security spend per employee was $381 per employee in 2013 overall,
and $399 for midsize enterprises.

In the midmarket, many security-related tasks are managed by IT staffers who are not devoted full
time to security and have limited expertise in the technical discipline. For these organizations, the
requirements to deploy new security controls to protect their businesses will exceed the capacity
and expertise of the resources tasked with security responsibilities.

Security has been a top priority (and challenge) for most midsize enterprises for the past three
years. IT leaders are being forced to secure more new IT solutions with flat IT budgets. Mobile and
cloud computing are examples of solutions forcing new security oversight, but budgets are not
increasing, and midsize enterprises still have to invest in their traditional systems. To counter the
increased spending to secure against advanced attacks, many midsize enterprises are opting for
affordable, "good enough" security solutions that are a good fit for midmarket IT environments.
Converged security platforms for mature areas of information security, such as network and
endpoint security (which usually accounts for 40% to 50% of total information security spending),
are proving to be practical. Endpoint protection platforms can reduce complexity and cut endpoint
security spending by 25% to 50%. Unified threat management (UTM) solutions, as opposed to
using multiple dedicated security solutions, can cut network security spending in half for midmarket
organizations. Administration and support are also significantly lower for UTM (see "Total Cost of
Ownership for Unified Threat Management"). Additionally, midsize enterprises are reporting success
in using managed services and security as a service to reduce maintenance costs and resource
time that is typically required to support routine premises-based security solutions, such as email
filtering, vulnerability scanning, log monitoring and firewall management.

Networking Spend in the Midmarket
The enterprise network continues to be an important expense for midsize enterprises. On average,
approximately 15% of overall IT spending is spent on data and voice networking. Midmarket IT
leaders are increasingly challenged to effectively manage and support a mix of new applications
and workloads (for example, voice, video, cloud and mobile) over the network with acceptable
levels of performance (see "How Cloud, Mobile and Video Will Increase Enterprise Bandwidth
Needs Through 2017").

Centralizing infrastructure such as servers and desktops via virtualization has increased capacity
and performance requirements within midmarket IT networks. In addition, the increased use of
public cloud services is increasing the performance and capacity requirements for midmarket
WANs.

Annual data networking costs in 2013 were approximately 8.9% of total IT spending, on average,
across all geographies, industries and company sizes. Midsize enterprises spent about the same
amount, 9.0%, of their IT budgets on data networking in 2013. Annual voice networking costs in
Page 4 of 7 Gartner, Inc. | G00258754




2013 were approximately 5.8% of total IT spending across all geographies, industries and company
sizes. Midsize enterprises spent about the same amount, 6.0%, of their IT budgets on voice
networking in 2013. Data and voice network costs as a percent of total IT spend are helpful in
understanding the relative level of networking costs to support the environment from a total IT
portfolio perspective.

Despite the increasing demand for performance and capacity in midmarket IT networks, reduction
of network expenditure is a primary source for cost-saving opportunities in midmarket IT
environments. Many are finding cost-saving opportunities in their networks by using industry best
practices for contract negotiation and management (see "Top Five Recommendations to Reduce
Your Network Equipment Support and Maintenance Costs").

Storage Spend in the Midmarket
Data is growing at an average of 30% to 40% annually in most organizations, which is putting
pressure on capital IT budgets. A 35% data growth rate per year requires more than double the
amount of storage every three years. Midsize enterprises, on average, have between 40TB and
50TB of storage. However, in line with the diverse nature of the midmarket, the amount of total
storage deployed across the midmarket varies significantly. A recent Gartner Research Circle survey
detailed the amount of storage typically deployed by midsize organizations worldwide (see Table 1).

Table 1. Storage Deployed by Midsize Organizations Worldwide


Storage Capacity Deployed (TB)

Percent of Organizations

1 to 9

13.3%

10 to 19

21.0%

20 to 49

24.8%

50 to 99

12.4%

100 or more

17.1%

Don't know

11.4%

Mean = 47.5TB; n = 105
Gartner Research Circle — SMB Spending Intentions survey (January 2014)
Source: Gartner (March 2014)



On average, midsize enterprises spent 7.2% of their total IT budgets on storage in 2013. The 2013
average storage cost per terabyte of capacity is $3,212 across all geographies, industries and
company sizes. Midsize enterprises spent $3,335 per installed terabyte.

New storage technologies are promising to cut storage costs by 50% in the next two years.
However, this cost benefit is being eclipsed by exponential data growth. Midsize enterprises are
Gartner, Inc. | G00258754 Page 5 of 7




also reporting that, even after applying storage efficiency technologies like thin provisioning and
deduplication, data growth continues to pressure storage budgets. Poor storage management
practices are also a contributing factor to higher storage costs. Many midsize enterprises make
wasteful investments by storing data that is rarely or never used, or they store low-value data on
high-cost storage.

Before making new investments on any storage solution, midmarket IT leaders should institute a
data management plan and delete or archive unused data. Many will discover that they do not need
to buy as much storage as anticipated after the exercise. This reduction in active data will also
reduce the software and hardware costs associated with backing up and archiving this data.

Once information governance is in place, midmarket IT leaders should take a serious look at cloud-
based storage services and preintegrated storage appliances, which can be cost-effective for some
storage workloads (see "Pragmatic Storage Solutions for the Midmarket").

Don't Settle for Average; Consider Business Requirements
Midmarket IT leaders want to understand how their organization's IT spending compares to same-
size and industry averages. However, acceptance that these average spending levels are
appropriate for your organization is short-sighted. Average IT spending metrics do not reflect IT's
contribution to business performance.

While the numbers in this report are indicative of enterprise IT spending levels, actual spending will
vary when considering specific business needs. In the end, midmarket IT leaders must focus on the
investment principles and guidelines required to ensure that all IT investments are worth making
based on the support and alignment to specific business requirements. Consideration must also be
made to ensure that investments (or lack of investments) do not expose the enterprise to an
unacceptable level of risk.

Ultimately, IT spending will need to be examined in tandem with other metrics and be put in the
context of business performance and value. Performance metrics to review should include revenue
per employee and income per employee. It is not enough to simply align to industry averages or try
to be lower on cost against the benchmarked averages. Aim to become better at reviewing IT spend
and performance metrics in tandem.



Gartner Recommended Reading
Some documents may not be available as part of your current Gartner subscription.
"IT Key Metrics Data 2014: Small and Midsize Enterprise Executive Summary"
"Total Cost of Ownership for Unified Threat Management"
"How to Negotiate Lower Storage Acquisition Costs"

"Midmarket Context: 'IT Leaders Can Benefit From Disruptive Innovation in the Storage Industry'"
Page 6 of 7 Gartner, Inc. | G00258754




"Midmarket Context: 'Why, When and How to Converge Storage and Data Networks'"
"Midmarket Context: 'Rightsizing' the Enterprise Data Center Network"
Gartner, Inc. | G00258754 Page 7 of 7




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