Getting value from IT investments
Published: 22 Dec 2005 16:10 GMT
Maximising the value of IT investments is a major issue, confirmed by a British Computer Society (BCS) survey of nearly 400 senior IT managers, conducted during March and April 2005, which found that top of the list of concerns is quantifying the value of IT. However, before any value judgements can be made on IT performance it is imperative that the relevant measurement processes and metrics are put in place.
Unfortunately, those IT departments capable of providing measurement information are in the minority; small wonder then that IT remains isolated, misunderstood, and treated simply as a cost centre by senior management. A contributing factor, although not an excuse, is that this is difficult and costly, requiring ongoing resources and commitment. This absence of measurement means that most organisations have no idea whether investments in IT are providing increased efficiency, added value, or competitive advantage.
There is increasing prominence being placed on the ability of IT deliverables to match organisation objectives. Unfortunately, there still appears to be a lack of focus by IT management on understanding the organisation's main value drivers. Without this it is impossible to formulate an IT strategy that will meet the organisation's needs. IT must improve transparency and visibility, with accountability for performance related to these value drivers.
An inordinate amount of IT executive time seems to be expended on measuring and controlling costs rather than focusing resources on initiatives that will add value to the organisation, probably because costs are easy to identify and quantify. This is unfortunate as there is a strong correlation between the knowledge growth of an enterprise and its market valuation.
It is becoming increasingly important for IT management to ensure that measurement mechanisms are put in place to identify intangible assets such as brand, organisation culture, customer loyalty, innovation, knowledge management systems, and the value of staff knowledge. A key step towards achieving this goal is for the IT management to determine the level of IT spending that supports business efficiency.
Whilst it is vital to continue to invest in the constant improvement of existing services and infrastructure to support growth, it is perhaps more important, from the perspective of adding value, that funds are made available to invest in projects that support new ways of doing business and improving collaboration. Therefore, IT management and senior management must reach an understanding as to the relative merits of each investment strategy and that a balance is achieved between funding for "Run the Organisation" and "Change the Organisation" spending.
However, "Run the Organisation" spending adds no real value, removes resources from project work, and affects delivery capability. Increasing IT efficiency remains a key issue, especially in an improving market. This makes measurement of existing services even more important, so an understanding can be reached which will enable the proportion of IT investment utilised to maintain the current systems to be explained and adequately communicated to senior management and charged out to the rest of the organisation.
In certain circumstances an IT strategy mainly supporting a "Run the Organisation" approach can be the right objective for an IT department to adopt, either because...
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