Resource Allocation vs. Resource Utilization: What's the Difference?

4 min read

Modern businesses rely on effective and tactical resource planning to make faster decisions and manage problems in real time.

Two key aspects of this strategic planning are resource allocation and resource utilization. Distinguishing between resource allocation and resource utilization is key to planning a successful, eliminating resource problems and gaining a competitive advantage.

What is the difference between resource utilization and resource allocation?

Allocation refers to the scheduling, organizing and assigning of tasks, while utilization refers to the strategic measuring of overall resource performance.

Resource allocation is when companies allocate effective resources against their desired goals. This usually involves project managers assigning specific tasks to team members or a project resource to allocate the workload necessary for project organization and project planning. Effectively managing a project schedule and a project’s internal or external dependencies can prevent scope creep and increase profitability.

Although many companies still use traditional resource allocation tools to forecast (like Excel spreadsheets), you need an advanced resource management tool and project management software (PMS) to make faster decisions, gain insight regarding the best way to order tasks and effectively allocate resources across the scope of a project.

Resource utilization differs from resource allocation in that it is a KPI that measures the efficiency of a team in relation to how it’s using its available resources. In other words, resource utilization creates KPIs that measure performance and effort over an amount of available time or capacity.

Optimal resource utilization and smart resource allocation allow project managers to foresee resource availability across multiple categories. This awareness allows teams to strategically plan their workforce schedules and make real-time remedial efforts to ensure the optimal health of new projects.

Both resource allocation and resource utilization are areas of project management that — when used together and augmented with resource management software — can sustain growth, increase profits, improve productivity and enhance an enterprise’s bottom line.

How do you measure resource utilization?

Resource allocation alone, although necessary for any new project, doesn’t provide the full view that project managers need to be proactive and strategic in their decision-making. This is what distinguishes resource utilization, and it is the reason why its role in a project’s success is essential.

Resource utilization solutions can track a team’s utilization efforts on multiple levels to provide a unified, real-time, comprehensive view that strategically measures the effectiveness of resources.

Overall resource utilization tracks actual allocated time against total available hours. Other utilization categories can also be calculated — like billable hours, non-billable hours and strategic resource utilization time. All of these time tracking categories are divided against total available resource capacity.

The clarity gained from resource utilization about the actual number of hours worked versus planned number of hours across project and operational categories allows for strategic capacity planning that can maximize a workforce, increase billable resources and optimize a team’s utilization to deliver on-time, quality results.

Resource utilization formula and rate calculation

Monitoring a team’s utilization and tracking individual performance productivity gives project managers one of the key KPIs for effective resource management. These calculations help in avoiding an overallocation of resources. 

Overallocation of resource scheduling can lead to an amount of working hours that cause employee burnout, and not having the right resources to effectively make use of project time can trigger unplanned delays. This is why it’s important to be able to accurately measure utilization and provision accordingly.

A typical resource utilization formula is calculated by dividing actual or allocated time by resource capacity. A utilization rate allows project managers to track resource performance and create resource utilization reports. Resource managers can then calculate billable tasks across new projects and engage in strategic capacity planning.

Smarter resource management

In order to optimize application performance and avoid bottlenecks and future problems, enterprises need to correctly estimate resource requirements. Yet, the complex, multi-layered abstractions of applications make it harder to understand which network resources are supporting or slowing down which applications. 

Forecasting via traditional methods in dynamic environments can often lead to overallocation. In addition, traditional operations tools can lead to inefficient resourcing, which can slow down the process of digital transformation.

As agile digital environments grow in complexity and infrastructures continually produce record amounts of new data, smarter resource management is needed.

An AIOps-driven approach — one in which enterprises allocate resources intelligently and with complete visibility across systems — allows enterprises to stay relevant. Deploying solutions that work across systems can reduce spend by addressing problems before they occur, eliminate future application resource issues by being able to interpret patterns and isolate incidents and transform application performance with less effort.

Automating resource decisions

Turbonomic Application Resource Management provides an AI-powered software solution that saves time and increases productivity by allowing teams to leverage their application data and generate intelligent, automated resource action across a full-stack hybrid cloud environment.

With intelligent application resource management solutions, a project team can continually get recommended actions based on actual runtime and microservice metrics, validate those trusted actions and partake in decision-making automations that will continually work to achieve a successful utilization of resources based on application data.

Application resource management (ARM) and IBM

Learn how Turbonomic Application Resource Management for IBM Cloud Paks monitors and optimizes applications, manages complex infrastructure, generates real-time analytics and delivers the trusted application insight needed to take intelligent automated action.

Dive deeper into the topics of smarter resource management, faster decision-making and predictive AIOps.

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