What is IT’s value? How do you measure it? Both are questions that constantly challenge CIOs and their C level peers. IT value can be difficult to measure, particularly when IT costs are direct and financial while IT value is indirect and operational. This has led people to apply indirect value metrics based on issues of cost, scope and schedule. The belief is that if IT can come in on cost, on scope and on schedule it must be creating value. Those metrics, shown in the figure below, are based on the idea that as long as IT does nothing wrong, IT must be doing something right.
IT value expresses as cost, scope and schedule or similar measures like availability, etc. do not reflect the value of IT. They only reflect the position that IT is not wasting the company’s money. Not wasting money is among the weakest sources of value.
It is time to re-imagine IT and re-imaging IT’s value. To develop a comprehensive view of IT’s value its important to ask a few questions and start with some basics. Each of these ideas appears below and they are linked to blog posts that explain them in greater detail.
What is the production function of IT? This blog post looks at IT’s role, what it does for an organization that no one else can do and therefore where is the source of value.
Measure IT’s value over time, not at any one point in time. This blog post provides guidance on how to think about the metrics that reflect IT’s real contribution to the organization. IT recognizes that
Infrastructure is perhaps the most productive asset in your organization. This post reminds us that IT infrastructure and operations provide unprecedented scale for most enterprises, it is just that we do not report scale so we do not get credit for it.
Finally, the one best metric to measure IT value, discusses a single metric – EBITDA/IT FTE, that used over time communicates the core value and leverage of IT.
Re-imagining the value of IT starts with recognizing that traditional cost and service based measures, while valid, do not capture the operational and transformational impact of IT. That impact exists in changes in business performance measured over time.
Adding the types of measures suggested in these posts to your current metrics pack extends the view of IT beyond the byte, service or storage into its business impact which makes IT value explicit and realistic.