higher end range would be applicable to financial consultants, who work long hours, often on the road at client locations. They are considered intense users requiring laptops, connectivity (the ability to dial in and have access to Internet and firm servers), and a 24/7 help desk. By comparison, a medical practice typically requires desktop computers for select staff, has set work schedules, and deals more with application-based requirements such as billing and Health Insurance Portability and Accountability Act (HIPAA) compliance.

One significant factor that increases a professional services firms IT costs is multioffice locations, which typically need to communicate with both the front and back offices of an organization. The thinner the spread of the firm, the greater is the potential for diseconomies of scale. The topic of benchmarking and IT costs is discussed in detail in The Executives Guide to Information Technology, (Wiley, 2002) Chapters 3 and 13.

information technology cost drivers* There are many potential IT cost drivers. Exhibit 2.15 outlines a number of factors to consider when analyzing a firms IT spending.24

economies of scale in information technology-are they achievable? Scale economies have an impact on spending levels and are an important consideration when looking at purchasing power and the ability of size to drive down costs. This makes perfect sense-but current trends and recent IT benchmarking show that, as companies grow, so do their IT requirements. When growing or expanding through acquisitions, firms want more technological capability. That means more service (e.g., they want to expand help desk hours from five days to seven days a week), more sophisticated software, or upgraded hardware. They perceive larger competitors as awash with IT perks or simply believe they have been sacrificing until now and that their growing organization should have all the bells and whistles.

As law firms expand, all costs expand as a percentage of revenue, not just IT costs. In addition, labor costs are a significant expense for firms IT departments. Labor costs are 30 percent to 40 percent of the average IT budget.

Five key drivers determine IT staffing levels:

1. Number of end users supported

2. Number of systems supported

3. Number of sites supported and geographic dispersion

4. Support requirements

5. Complexity of the environment (number of different types of applications, systems, and networks)

Exhibit 2.15 Key Drivers of IT Cost

(continued)

Exhibit 2.15 Continued

Creating an IT budget requires the analysis of a large number of variables and the weighing of multiple competing priorities, while devising the most cost-effective approach for delivering mission-critical services. Because of the impact the budget has on the IT departments ability to run effectively, budget creation is one of the most important jobs of an IT manager.

One area to consider for benchmarking is the breakout of spending for an IT budget. A professional services firm IT budget should have these spending ranges: