I am an IT consultant and my current project is with an insurance company. I am proposing a new project to automate the operations of the company. The company’s gross revenue last year was around US$10million. Based on the last 3 years, it’s revenue has been increasing by an average of 10% per year. I am proposing a project with a capital expenditure of around US$1,500,000.
My question: Is there a benchmark or a standard for measuring the percentage of an IT investment versus it’s company’s gross revenue? Say, with the above example, it’s 15% of gross revenue (or $1.5m over $10m). In other words, is the 15% example too large an amount? I have to convince the company’s management that a certain percentage of gross revenue is a standard for IT capital investment.
If there are no standards, then what is the common practice among IT Managers/Professionals?