ROI in The Discrete Manufacturing Industry

ROI in the Discrete Manufacturing Industry
The Best Indicator of the Business Value of IT Across Size and Geography
An Alinean White Paper Paul Demopoulos with Jefre Futch and Tom Pisello
Published by: Alinean, Inc. 201 S. Orange Ave Suite 1210 Orlando, FL 32801-12565 Tel: 407.382.0005 Fax: 407.382.0906 Email: info@alinean.com Web: www.alinean.com
December 2008
Copyright 2001-2009, Alinean, Inc. All rights reserved. No part of this report may be reproduced or stored in a retrieval system or transmitted in any form or by any means, without prior written permission. All other trademarks are the property of their respective owners

Copyright 2001-2008 Alinean, Inc. All Rights Reserved.
ii

Introduction to KPIs for ROI in Discrete Manufacturing ................ 1 Industry Leading Results and Red Flag Performance Levels ........... 2 Where Does My Company Fit? .................................................... 3
Getting a grip on Shadow IT - a common problem a hidden cost.................. 4 Innovation Spending weakness for poor performers ................................... 4 Project Success rates set Discrete Manufacturing apart ............................... 5
Significant Company Size and Geographic Indicators .................... 6

The challenge of growing small and medium companies .............................. 6 Large and medium-size companies innovate across the board ...................... 7
Market Pressures Impacting Performance in Context of Geography.............................................................................. 7

Geography reflects market maturity ........................................................ 7
Conclusion ............................................................................. 9 Appendix A ROI Key Metric Definitions....................................10 Appendix B Industry SIC Codes for Discrete Manufacturing ........11 Appendix C Discrete Manufacturing Size Breakdown Results by Key Metric .........................................................................13 Appendix D Select Discrete Manufacturing and Cross Industry Results ....................................................................15

iii
Introduction to KPIs for ROI in Discrete Manufacturing

The diversity of discrete manufacturing presents its own unique challenges and opportunities across an increasingly global and competitive landscape. Research suggests that the industry sector will grow in excess of 6% annually from 2008 through 2010. But recent economic downturns will put a drag on that growth as well as create pressure on companies to restrain spending across the board, including on Information Technology (IT). Now more than ever, it is important to get the most out of IT investments. The challenges unique to this sector include competitive pressure from new entrants in emerging marketplaces with lower cost bases, rapidly changing requirements trending toward special machinery, and more segmented offerings across a diversity of models and versions. For IT this means supporting shorter product development times, more innovations, and flexibility. With software and electronic components embedded into more and more products, demand for global support services increases as well. For companies IT departments to manage effectively in such an environment, key measures of IT performance and contribution to the business are critical. Return on IT (ROIT) offers a single key performance indicator that helps measure the efficiency and effectiveness of IT spending against overall company performance. The metric is a top-down measurement of IT spending productivity correlating IT spending with financial performance into a single, concise comparative metric for current performance assessment and planning. ROIT is calculated as Net Income divided by IT Spending. For a company to sustain profitability while limiting IT investments and drive a higher ROIT, a set of key indicators measuring Shadow IT, focus on innovation, and project-delivery success are essential to ensure spending remains focused in the right areas. Using ROIT to perform an IT performance analysis on corporations in Alineans ValueBase, the data indicate that, on average, companies that spend more on IT are not achieving higher results. Furthermore, companies that spend less on IT are not, on average, seeing lower performance.
300 200 100 0 Company 1 Company 2 IT Investment Profits ROIT
This is one of a series of papers that provide comparisons by industry based on IT spending and performance characteristics. These Peer Comparisons provide direction and should be used in combination with each companys own comparison to its historical performance over time. Doing so will ensure that gains are made in alignment with strategic priorities. These comparisons suggest that, for Discrete Manufacturing, small companies tend to overspend on IT overall while underspending on Innovation relative to their larger peers, while large companies struggle to control Shadow IT. Companies in the US have the lowest success rate of project completion with expected benefits, but across this entire sector, driving greater returns relies mostly on judicious project selection in order to reduce risk rather than dramatic reduction of Shadow IT or increased Innovation spending.

Industry Leading Results and Red Flag Performance Levels

Across four key industry sectors research shows a mix of positive correlation between IT Spending and Net Income. For Discrete Manufacturing the indicators lag the other industries in ROIT as well as for the normalized spending metric IT spending as a percentage of Revenue (IT % of Revenue or IT/Rev).
Industry Discrete Manufacturing Process Manufacturing Professional Services Trades IT % of Revenue 2.4% 1.5% 3.1% 1.8% ROIT 286% 625% 291% 297%
Using ROIT to identify whether selected companies are in the top or bottom quartile for Discrete Manufacturing and segmenting those results indicates a general pattern that controlled IT spending yields better performance. However, the Discrete Manufacturing businesses spend a somewhat higher percentage of revenue on IT than companies across the selected sectors. This reflects the greater demands to deliver higher levels of integration, process harmonization, and application standardization across Product Lifecycle Management, Supply Chain Management, and other key areas. This requirement for more powerful IT solutions, as well as efficient user-support services in developing and producing countries, results in a need for greater investment. Competitive pressure keeps returns lower than the average.
IT Spending as a % of Revenue vs. Profitability Performance (ROIT)

3.5% 3.0%
2.4% 3.3% 3.0% Discrete Manufacturing All Companies 2.2%
2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Top Quartile
1.6%
1.4%
Database Average
Bottom Quartile

Where Does My Company Fit?

By focusing on the indicators of strong and weak performance for businesses in their industry, managers of IT for businesses can evaluate their own performance and take immediate action to improve performance. For Discrete Manufacturing firms, the goal should be ROIT in excess of 549% (the 75th percentile threshold) and not below 64% (the 25th percentile threshold).
ROIT Average
1341.80% 1237.00% 1500.00% 1000.00% 500.00% 0.00% -500.00% -1000.00% Bottom Percentile Database Average Top Percentile -608.60% -481.50% 286.10% 351.90% Discrete Manufacturing All Companies
But ROIT and IT Spending / Revenue values themselves fail to tell the entire story. In fact a wide range of metrics were explored in a previous paper1 and their definitions are included in Appendix A of this paper. The table below shows values for a key subset of metrics that act as performance characteristic levers that impact a companys overall ROIT Measuring performance of ROIT and the associated IT Key Performance Metrics introduced here differentiate top and bottom performers. For Discrete Manufacturing poor performers, below the 25th percentile, the results presented in this paper should be examined to determine whether their approach to Shadow IT Spending, Innovation Spending, or Project Risk contributes the most to their lagging performance. Addressing these areas of weakness can be the first step to improving ROIT and improving the business value of IT across the organization.2
Discrete Manufacturing Top Quartile Average 1.6% 1237.8% 4.2% 20.9% 36.9% Discrete Manufacturing Database Average 2.4% 286.1% 4.9% 17.2% 32.2% Discrete Manufacturing Bottom Quartile Average 3.3% -608.6% 5.7% 9.7% 25.7%
Discrete Manufacturing Key Metric
Average of IT/Rev Average of ROIT Average of Shadow IT Spending Average of Innovation Average of Successful Delivery
1
2
The Importance of Measuring ROI, The Indicator of Business and IT Performance; Alinean, Inc, 2008
For the following table and all subsequent charts, data is specific to the members of the Discrete Manufacturing industry sector only except where otherwise indicated as pertaining to All Industry Sectors.

Getting a grip on Shadow IT - a common problem a hidden cost

Top performers control Shadow IT spending to a greater degree than others with the spread between best and worst being a full third more spending for the worst performers than the best. Shadow IT Spending occurs in business units under the radar. This hidden spending causes severe IT issues later as the project is developed, launched, and then needs support often by central IT. Worse, these projects are often nonstandard outside of normal and supported architecture, platforms and quality standards. As $4:$1 is the ratio of initial investment to ongoing support, unchecked shadow spending drives up Central IT spending in outgoing years. Given that overall spending for the worst performers is routinely higher than that of the best performers, we can well assume that this difference is magnified even further in terms of the total costs of such spending. Shadow IT Spending above the 4.9% average should be cause for concern and steps must be taken to bring it under control.
Discrete Manufacturing Shadow IT Spending 8.0% 6.0% 4.0% 2.0% 0.0% 4.19% 4.91% 5.72%
Top Quartile
Database Average
Bottom Quartile
Innovation Spending weakness for poor performers

Companies with Innovation Spending percentages below 17.2% (the innovation average across the industry) lag the industry and indicate a need to explore project choices to drive innovation. For high spenders, this means freeing investment dollars from Operations and Maintenance activities first through server and storage consolidation, outsourcing or managed services, and IT productivity measures such as system-configuration management solutions. Frugal spenders must demonstrate the benefits of increased innovation spending to management through ROI project analysis that will drive top-line growth.
Innovation Investment Comparison Discrete Manufacturing Industry

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
9.7% 25.1% 22.4% 22.0% 19.6% 20.9%
Innovation
65.2%
58.1%
57.1%
Migrations and Upgrades Operations
Poor Performers
Average Performers
Top Performers

In choosing the most effective and innovative projects for Discrete Manufacturing today, we recommend the following areas that focus on the core business activities: Streamline the manufacturing process from production scheduling to purchasing and logistics. Manage material requirements for multilevel production processes; create manufacturing-resource planning scenarios to forecast demand, and generate automatic replenishment orders to avoid production-material shortages. Leverage real-time technologies to track inventory levels and stock movements to minimize out-ofstock situations, increase goods availability, and reduce inventory-carrying costs. Ensure compliance with increasing government mandates and industry guidelines.
Project Success rates set Discrete Manufacturing apart

Project Delivery metrics indicate significant room for improvement across all size ranges of companies in the Discrete Manufacturing space for average and poor performers. However, the overall average is significantly improved by the success of the best performers, indicating the significant potential for improvement for the lower-performing members in this industry sector. There is always room for improvement in this category and for the large number of companies failing to achieve even this measure, portfolio to ensure that the right resources are available throughout the development cycle remains critical to successful delivery on the most value added of projects.
Project Results Breakdown All Selected Industry Sectors Cancelled 11.3% Successful and Meeting ROI Goals 33.6% Issues with Budget, Schedule and Functionality 21.9% Successful, but not to ROI standards 33.2% Successful and Meeting ROI Goals 33.2% Project Results Breakdown Discrete Manufacturing Cancelled 11.4% Issues with Budget, Schedule and Functionality 22.0% Successful, but not to ROI standards 33.4%
The Discrete Manufacturing sector as a whole seems to do a significantly better job of managing projects to completion; however, an individual company with project success rates below 32.2% would lag the rest of the manufacturing industry and point to the need to improve project selection, commitment to project goals, and the overall project-development process.

Significant Company Size and Geographic Indicators

Analyzing the set of key metrics by company size3 identified several individual variations that stand out. The select metrics discussed below can be found along with the comprehensive results in Appendix C to allow readers to compare their own results to similar sized companies.
Discrete Manufacturing Key Metrics IT/Rev Size Small Large Shadow IT Spending Medium Small Medium Innovation Small Projects Delivered Short Successful Delivery IT Spending Growth Average Average Medium 21.2% 31.5% 36.9% 90.6% 14.3% 34.4% 33.2% 39.2% 8.6% 37.2% 25.7% 34.0% Discrete Manufacturing Top Quartile 2.0% 5.13% 4.04% 3.26% 20.9% Discrete Manufacturing Average 3.4% 5.60% 4.85% 4.43% 17,5% Discrete Manufacturing Bottom Quartile 4.3% 6.62% 5.97% 5.09% 10.2%
The challenge of growing small and medium companies

IT Spending as a percentage of revenues for small Discrete Manufacturing companies across the board was considerably higher than for medium and large companies. While this reflects a higher requirement for IT infrastructure spending as a percentage of company operations in smaller environments, the top quartile Discrete Manufacturing performers manage to better control spending. As small companies grow into the range of medium-size companies, continued control of overall spending becomes critical. In contrast, the Shadow IT Spending that is so hard to control at large companies cannot be hidden in small ones. Growing small companies that focus on controls to Shadow IT Spending may be able to better limit overall spending and drive ROIT performance. With an average Shadow IT Spending of 4.4% for small Discrete Manufacturers, any results in excess of this value should result in aggressive steps to adopt IT Governance across the company before these poor practices become entrenched in the culture. The worst performers among these size businesses clearly fail to invest in innovation to the degree of their larger peers. To move forward, companies that are performing in the lowest for ROIT for Discrete Manufacturing should look to target IT spending where it can drive the most top-line revenue. For small Discrete Manufacturing firms with an average innovation score below 14.3%, opportunities to reduce operational costs in favor of innovation spending approaching 20% of IT can drive company growth and ROIT. The best performing small companies exceed this target on average. Small companies have the biggest relative range in key metric values from best to worst performers. While this reflects the variability more common to small companies, comparisons to medium-size company values can provide the best guideposts for where a small company may want to focus its initiatives. Successful delivery and Shadow IT show less disparity from worst to best, but significant improvements there will undoubtedly contribute to overall performance.
Company size breakdowns are based on: Small = less than $50M in Revenue; Medium = less than $1B; Large = more than $1B

In times of economic growth, two particular sub-segments get a very clear recommendation. These are small companies and companies that are performing in the lowest quartile for Discrete Manufacturing. Those that find themselves in either of these categories need to be cautious about allowing cultures to develop that enable Shadow IT Spending. This creates long term burdens for Central IT support that will reduce IT agility as the company grows.
Large and medium-size companies innovate across the board

Innovation forms a larger part of IT Spending for the large and medium-size companies and top performers across the board All but the worst performers reach or exceed a 20% target threshold. But to move forward, companies that are performing in the lowest Discrete Manufacturing quartile for ROIT should look to target IT spending where it can drive the most Top-Line Revenue. For large Discrete Manufacturing companies, Innovation Spending below 19.0% (the entire sector average) should trigger red-flag actions to reevaluate the portfolio of IT activities and spending. For medium-size companies, the threshold should be 17.5%. IT Spending growth trends for medium-size performers also require special attention. While IT spending overall seems to be growing significantly faster than the economy as a whole, for poor performers this growth in 2008 was dramatic [Note: analysis performed prior to the late 2008 economic downturn]. Whether this reflects pent-up demand with the expectation of improved performance to follow or is rather the root cause of poor performance from monies spent without a reasonable return will become apparent in the next year. But any organization with year over year IT spending growth of over 80% should carefully examine the underlying details in light of its own organizations strategic goals.
Market Pressures Impacting Performance in Context of Geography

Geography reflects market maturity
For Geography, the data for the Discrete Manufacturing industry sector reflects market maturity as well as cultural differences. For IT Spending as a percentage of revenue in this sector, the results show predicted lower spending for the better performing companies, but more significantly there has been dramatically smaller spending in developing markets like China and Southeast Asia with higher percentages in the developed European, Japanese, and US markets. This reflects the costs in the market place relative to profits. However, across the board there remains no direct correlation to performance, so despite low spending, these Discrete Manufacturing companies in these markets deliver comparably high ROIT.
Discrete Manufacturing Key Metrics Successful Delivery Geography Greater China United States IT Spending Growth Central and Northern Europe Greater China Japan Southeast Asia United States IT/Rev Greater China United States Shadow IT Spending Central and Northern Europe Discrete Manufacturing Top Quartile 37.4% 36.8% 7.6% 60.4% 18.1% 27.9% 16.8% 1.1% 1.9% 3.54% Discrete Manufacturing Average 33.4% 31.6% 23.9% 40.6% 16.4% 13.8% 45.6% 1.2% 2.9% 3.50% Discrete Manufacturing Bottom Quartile 24.4% 25.3% 15.8% 15.3% 13.9% -19.7% 89.0% 1.6% 3.6% 3.37%

Discrete Manufacturing Key Metrics
Geography Greater China Japan Southeast Asia United States
Discrete Manufacturing Top Quartile 2.44% 2.56% 2.31% 8.08% 21.4% 20.8%
Discrete Manufacturing Average 2.38% 2.50% 2.31% 7.98% 19.5% 19.5%
Discrete Manufacturing Bottom Quartile 2.25% 2.37% 2.14% 7.88% 8.4% 9.3%
Innovation
Greater China United States
Interpreting the results of Shadow IT Spending is far more reflective of culture, where entrepreneurial initiatives in developed markets such as the US, result in more uncontrolled IT expenditures. Innovation spending is not distinguishable by region but does correlate with ROIT; it is clear regardless of geography, that better performing companies invest significantly greater portions of their IT budgets on innovation. For Greater China, IT Spending growth reflects the overall high growth in that economy. Developing market economies have room to increase IT Spending relative to revenue and still keep pace with peers in developed markets. Asian companies in the Discrete Manufacturing top quartile should exploit low costs of IT, primarily labor, to drive innovation and continue to capitalize on opportunities to increase market share and market power. Most significant of the geographic differentiations comes under the category of project risk factors. Here, the US clearly lags other large markets on average and particularly for poor performers. A low rate for fully successful projects coupled with the low percentage that get completed without fully delivering benefits demonstrates a tolerance for failure, a failure to adequately select and plan for projects, and the overly ambitious and aggressive projects that drive these results. In the US, the worst ROIT performers in Discrete Manufacturing have the highest spending growth. This reflects attempts to drive revenue with deficit spending in the hopes of greater returns in future years. Among US based organizations, particularly poor performers must address the project-development processes in order to deliver more successful projects, always trying to keep spending from spiraling out of control. North American companies in the Discrete Manufacturing top quartile will have greater freedom to improve development processes, control costs, and continue to innovate. During times of market slowdowns, the best-performing companies have the opportunity to retool and enhance their capabilities, positioning themselves to grab market share during the slowdown and especially during any recovery. Obviously, large US-based companies in the lowest quartile for Discrete Manufacturing must retrench and get control over IT operations. Pairing a business down to core competencies and soliciting expert support through subscriber-based pay-as-you go contracts will enable firms to focus on the core of their business and limit the scope of their IT investments to new initiatives. Furthermore, projects at significant risk for failure should never be started, often being a distraction from capitalizing on a smaller number that enhance existing key business differentiators. Risky projects that must be undertaken should require guarantees of success, negotiated with service providers who can deliver on those projects.

Conclusion
Across all of Discrete Manufacturing companies in the Alinean ValueBase, average revenue grew through 2007. Conversely average Net Income fell for the worst performers (lowest 25%) in terms of ROIT. But IT Spending continued to fall as a percentage of revenue even though revenue was up faster than IT Spending, signaling a focus away from IT into other parts of the business during that critical year. In light of recent market conditions, these measures will profoundly change in late 2008 and 2009. With an emphasis on cost cutting, IT organizations have the opportunity to control short-term spending investments by moving to fixed-price subscription deals, seeking integrated suites of products that will allow them to reap the benefits of standardization and eliminate support costs for a multitude of different solutions. By freeing a small amount of remaining resources for prototyping and trial initiatives, IT departments can then lead the business by testing the viability of major projects before a full commitment is made. When project investments are made, teaming with successful and experienced partners that are willing to take a stake in achieving the goals and positive outcomes of the project will reduce risk. If IT Spending can be maintained or reduced more slowly than revenues fall in the future, IT Spending as a percentage of revenue will begin to rise again. However, without Net Income to go with the relative rise in IT Spending, no ROIT improvement will result. The key remains to focus on how IT impacts Net Income. For successful companies, the goal is continuing to drive Top-Line Revenue through innovation; while for struggling companies, reducing internal expense to improve the corporate Bottom Line should be the focus. Selecting IT projects that impact the business ability to drive that revenue or control those expenses will be necessary. For the Discrete Manufacturing Industry, there are significant variations in performance, measured by ROIT between the best performers and worst performers, across company size, and across geography. As markets slow down, best and worst performers must approach IT Spending differently. In order to impact results effectively, a rigorous measurement program that monitors ROIT and related metrics must be put in place. Without effective measurement, management will have little insight into what initiatives are most successful. Furthermore, in selecting initiatives, a comprehensive Portfolio Management approach ensures that the entire landscape of IT projects are scoped, monitored, managed, and supported or killed as appropriate in the context of the companys performance and strategic direction.

Appendix A ROI Key Metric Definitions

Metric
Net Income
Description
The overall corporate performance metric by which many executives and business units are measured and the overall net benefit or result of corporate investments and spending. Used as the Return component for ROI in ROIT. The sum of Formal IT Spending, Business Unit Control and Shadow IT Spending. Used as the Investment component for ROI in ROIT. A single key performance indicator that helps measure the efficiency and effectiveness of IT spending against overall company performance. The metric is a top-down measurement of IT Spending productivity correlating IT Spending with financial performance into a single, concise comparative metric for current performance assessment and planning. Calculated as Net Income / IT Spending. Direct revenue from the sale of a companys goods and services. Often referred to as Top-Line Revenue. Used as the Revenue Component in subsequent metrics. Used to normalize investments across companies. Defines method by which IT Spending is directed and accounted including Formal IT, Business Unit, and Shadow IT Spending to get a complete picture of the total IT investments. The IT budget allocated and controlled by the CIO and IT group. The IT budget controlled by business units and leaders. The hidden expenditures of business units and users that occur informally in the business units, out of the control or oversight of the Central IT function. This often results in additional long-term Central IT support requirements. This is in direct contrast to formal Business Unit (BU) Control and Formal IT Control. A breakdown of IT Spending on Ongoing Operations and Maintenance, Upgrades and Migrations, and Innovation. Managing and supporting existing systems and applications, optimizing infrastructure TCO; so called Keeping the lights on. Migration and change costs, including soft costs such as security impacts on business and productivity, business evolution and agility. In frugal economic times, companies seek to delay hardware and software upgrades. The percentage of IT Spending allocated to new projects and initiatives that provide new capabilities to users, new products to customers, and new business opportunities. This is in direct contrast to spending on IT Spending on Ongoing Operations and Maintenance or routine Upgrades and Maintenance of existing capabilities. IT becomes a strategic enabler for business growth. It consists of a framework in which processes, communications, IT functions and technology decision making are further synchronized and aligned to ensure a full integration of the business goals and objectives with the IT strategy. A breakdown of those projects successfully delivered and value realized, projects successfully delivered but short on promised value, projects behind schedule, over budget, short on functionality, and projects canceled before completion. The percentage reflecting the subset of projects that have been completed successfully and which have achieved their stated ROI goals for the organization. The percentage reflecting the subset of projects that have been completed, but which have not achieved their stated ROI goals for the organization. The percentage reflecting the subset of projects that have not yet been completed and which furthermore are known to have schedule budget or functionality issues. It is important to note that incomplete projects without issues are excluded from this metric's calculations. The percentage reflecting the subset of projects that have been prior to completion.
IT Spending
Return on IT (ROIT)
Sales Revenue IT Spending / Revenue IT Spending Controls Formal IT Control Business Unit Control
Shadow IT
Innovation Index Ongoing IT Spending on Operations and Maintenance IT Spending on Upgrades and Migrations
IT Spending on Innovation
IT Project Risk Analysis Projects successfully delivered and value realized Projects successfully delivered but short on promised value Projects behind schedule, over budget, short on functionality Projects canceled before completion

10
Appendix B Industry SIC Codes for Discrete Manufacturing

SIC Code 3011 3264 3511 3519 3531 3532 3533 3541 3542 3546 3548 3555 3556 3559 3561 3562 3563 3564 3566 3567 3568 3569 3571 3572 3575 3577 3578 3579 3585 3589 3594 3599 3612 3613 3621 3624 3629 3646 3648 3661 Description Tires and Tubes Automotive Supplier Porcelain Electrical Supplies Steam Gas and Hydraulic Turbines and Turbine Generator Set Units Internal Combustion Engines NEC IM&C Machinery Construction Machinery and Equipment IM&C Machinery IM&C Machinery
Mining Machinery and Equipment Except Oil and Gas Field Machinery and Equipment IM&C Machinery Oil and Gas Field Machinery and Equipment Machine Tools Metal Cutting Type Machine Tools Metal Forming Type IM&C Machinery
IM&C Machinery IM&C Machinery
Power Driven Handtools IM&C Components Electric and Gas Welding and Soldering Equipment IM&C Components
Printing Trades Machinery and Equipment IM&C Machinery Food Products Machinery IM&C Machinery Special Industry Machinery NEC IM&C Machinery Pumps and Pumping Equipment Ball and Roller Bearings IM&C Machinery
IM&C Components
Air and Gas Compressors IM&C Machinery Industrial and Commercial Fans and Blowers and Air Purification Equipment Speed Changers Industrial High Speed Drives and Gears IM&C Components Industrial Process Furnaces and Ovens IM&C Machinery Mechanical Power Transmission Equipment NEC IM&C Machinery IM&C Components
General Industrial Machinery and Equipment NEC IM&C Machinery Electronic Computers Computer Storage Devices Computer Terminals Computer Peripheral Equipment NEC Calculating and Accounting Machines Except Electronic Computers Office Machines NEC Air Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment IM&C Machinery Service Industry Machinery NEC IM&C Machinery Fluid Power Pumps and Motors IM&C Components
Industrial and Commercial Machinery and Equipment NEC IM&C Machinery Power Distribution and Specialty Transformers IM&C Machinery Switchgear and Switchboard Apparatus Motors and Generators Carbon and Graphite Products Electrical Industrial Apparatus NEC IM&C Components IM&C Components
Commercial Industrial and Institutional Electric Lighting Fixtures Lighting Equipment NEC Telephone and Telegraph Apparatus

11
SIC Code 3663 3669 3672 3674 3675 3676 3677 3678 3679 3691 3692 3694 3695 3699 3714 3743 3812 3821 3822 3823 3824 3825 3827 3829 3851 3861 3873 7372
Description Radio and Television Broadcasting and Communication Equipment Communications Equipment NEC Printed Circuit Boards Semiconductors and Related Devices Electronic Capacitors Electronic Resistors Electronic Coils Transformers and Other Inductors Electronic Connectors Electronic Components NEC Storage Batteries Primary Batteries Dry and Wet Electrical Equipment for Internal Combustion Engines Magnetic and Optical Recording Media Electrical Machinery Equipment and Supplies NEC IM&C Components Parts and Accessories Automotive Supplier Railroad Equipment/Transportation Equipment IM&C Components
Search Detection Navigation Guidance Aeronautical and Nautical Systems and Instruments IM&C Components Laboratory Apparatus and Furniture IM&C Machinery IM&C
Automatic Controls for Regulating Residential and Commercial Environments and Appliances Components Industrial Instruments for Measurement Display and Control of Process Variables Totalizing Fluid Meters and Counting Devices Instruments for Measuring and Testing of Electricity and Electrical Signals Optical Instruments and Lenses IM&C Components Measuring and Controlling Devices NEC IM&C Components Ophthalmic Goods IM&C Components
Photographic Equipment and Supplies Watches Clocks Clockwork Operated Devices and Parts Prepackaged Software IM&C Components

12
Appendix C Discrete Manufacturing Size Breakdown Results by Key Metric

Discrete Manufacturing Size Discrete Manufacturing Top Quartile 1157.39% 1201.3% 1577.5% 1.5% 1.6% 2.0% 5.1% 4.0% 3.3% 21.5% 19.0% 18.0% 73.4% 77.0% 78.7% 57.1% 57.1% 56.9% 22.0% 22.0% 21.9% 20.9% 20.9% 21.2% 10.7% 10.7% 10.7% 20.8% 20.8% 20.7% 31.6% 31.5% 31.4% 36.9% 36.9% 37.2% 14.0% 25.3% 78.9% 122 358 66 Discrete Manufacturing Middle Half 331.35% 282.7% 266.2% 2.2% 2.3% 2.9% 5.6% 4.7% 4.0% 23.3% 21.1% 21.0% 71.0% 74.2% 75.0% 58.0% 58.1% 58.2% 22.3% 22.4% 22.4% 19.7% 19.5% 19.4% 10.9% 11.0% 11.0% 21.2% 21.3% 21.3% 32.1% 32.2% 32.3% 35.7% 35.5% 35.4% 15.9% 16.8% 26.9% 242 635 136 Discrete Manufacturing Bottom Quartile -463.76% -398.1% -996.6% 1.9% 2.9% 4.3% 6.6% 6.0% 5.1% 26.7% 25.5% 24.3% 66.7% 68.5% 70.6% 64.7% 64.8% 66.0% 24.9% 25.0% 25.4% 10.4% 10.2% 8.6% 12.5% 12.5% 12.8% 24.3% 24.4% 24.9% 36.8% 36.9% 37.7% 26.4% 26.2% 24.6% 11.8% 79.0% 42.3% 47 338 201 Discrete Manufacturing Sector Average 485.62% 356.2% -148.8% 1.9% 2.3% 3.4% 5.6% 4.8% 4.4% 23.2% 21.7% 22.1% 71.2% 73.5% 73.4% 58.5% 59.5% 61.9% 22.5% 22.9% 23.8% 19.0% 17.5% 14.3% 11.1% 11.3% 11.8% 21.5% 21.9% 23.0% 32.5% 33.2% 34.8% 35.0% 33.5% 30.3% 14.8% 35.1% 43.0% 411 1,331 403
Average of ROIT
Large Medium Small
Average of IT/Rev
Large Medium Small
Average of Shadow IT Spending
Large Medium Small
Average of BU IT Spending
Large Medium Small
Average of Formal IT Spending
Large Medium Small
Average of On Going Operations
Large Medium Small
Average of Migration Upgrades
Large Medium Small
Average of Innovation
Large Medium Small
Average of Canceled
Large Medium Small
Average of Behind Schedule
Large Medium Small
Average of Delivered But Short
Large Medium Small
Average of Successful Delivery
Large Medium Small
Average of Total IT Spending Growth
Large Medium Small
Count of Companies
Large Medium Small

13
Discrete Manufacturing Industry Sector Results
Discrete Manufacturing Top Quartile 1237.02% 1.6% 4.2% 19.4% 76.4% 57.1% 22.0% 20.9% 10.7% 20.8% 31.5% 36.9% 28.4% 546
Discrete Manufacturing Middle Half 292.11% 2.4% 4.8% 21.6% 73.5% 58.1% 22.4% 19.6% 11.0% 21.3% 32.2% 35.6% 17.8% 1,013
Discrete Manufacturing Bottom Quartile -608.64% 3.3% 5.7% 25.2% 69.1% 65.2% 25.1% 9.7% 12.6% 24.5% 37.2% 25.7% 60.9% 586
Discrete Manufacturing Sector Average 286.11% 2.4% 4.9% 22.0% 73.0% 59.8% 23.0% 17.2% 11.4% 22.0% 33.4% 33.2% 32.4% 2,145
Average of ROIT Average of IT/Rev Average of Shadow IT Spending Average of BU IT Spending Average of Formal IT Spending Average of Ongoing Operations Average of Migration Upgrades Average of Innovation Average of Canceled Average of Behind Schedule Average of Delivered But Short Average of Successful Delivery Average of Total IT Spending Growth Count of Companies
All Industry Sectors All Industry Sectors Average of IT/Rev All Industry Sectors Average of Shadow IT Spending All Industry Sectors Average of BU IT Spending All Industry Sectors Average of Formal IT Spending All Industry Sectors Average of On Going Operations All Industry Sectors Average of Migration Upgrades All Industry Sectors Average of Innovation All Industry Sectors Average of Canceled All Industry Sectors Average of Behind Schedule All Industry Sectors Average of Delivered But Short All Industry Sectors Average of Successful Delivery All Industry Sectors Average of All Industry Sectors IT Spending Growth Total Count of Companies
Top Quartile 1.4% 4.1% 19.2% 76.6% 57.0% 22.0% 21.0% 10.7% 20.8% 31.5% 37.0% 33.9% 1,068
Middle Half 2.2% 4.9% 21.6% 73.5% 58.1% 22.4% 19.5% 11.0% 21.3% 32.3% 35.5% 20.3% 2,132
Bottom Quartile 3.0% 5.6% 24.4% 70.0% 64.7% 24.9% 10.4% 12.5% 24.3% 36.8% 26.4% 39.4% 1,067
Database Average 2.2% 4.9% 21.7% 73.4% 59.5% 22.9% 17.6% 11.3% 21.9% 33.2% 33.6% 28.4% 4,267

14
Appendix D Select Discrete Manufacturing and Cross Industry Results
IT Spending as a % of Revenue vs. Profitability Performance (ROIT)

5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Discrete Manufacturing Process Manufacturing Professional Services Trades All Sectors
Top Percentile 1.7% 1.0% 2.3% 1.0% 1.4%
Database Average 2.5% 1.5% 3.2% 1.9% 2.3%
Bottom Percentile 3.4% 1.8% 4.3% 2.6% 3.1%
All IndustrySectors IT Spending Shadow 4.9% Business Units 21.7%
Discrete Manufacturing IT Spending Shadow 5.0% Business Units 22.0%
Central IT 73.4%
Central IT 73.0%
Discrete Manufacturing Shadow IT Spending

7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
5.72% 4.19% 4.91%
Top Quartile
Database Average
Bottom Quartile

15
Innovation Investment Comparison All Industry Sectors Average

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
10.4% 24.9% 22.0% 22.0% 21.0% 21.0%
Innovation Investment Comparison Discrete Manufacturing Industry

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
9.7% 25.1% 22.4% 22.0% 19.6% 20.9%
Innovation Migrations and Upgrades Operations
Innovation
64.7% 57.0% 57.0%
Migrations and Upgrades Operations
65.2%
58.1%
57.1%
Poor Performers
Average Performers
Top Performers
Poor Performers
Average Performers
Top Performers

16

ROI in The Discrete Manufacturing Industry

Transféré par

Informations du document

Description originale:

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

ROI in The Discrete Manufacturing Industry

Transféré par

Droits d'auteur :

Formats disponibles

ROI in the Discrete Manufacturing Industry