Mark McDonald

A member of the Gartner Blog Network

Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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Re-Imagining IT’s value in the enterprise

by Mark P. McDonald  |  June 6, 2011  |  2 Comments

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.

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2 responses so far ↓

  • 1 Lyne Bouchard   June 7, 2011 at 4:16 pm

    Hello Mark,

    You could not have said it better! Our view of IT’s contribution to our organisations is myopic, largely the result of the fact that we tend to present feedback on what IT does and how it does it as opposed to what the technology contributes to the organisation. We measure the performance of the IT organisation in the delivery of projects and of all its activities, not how well technology helps an organisation perform better and achieve its ultimate objectives.

    There is the long debate as well as to whether the IT department should be held accountable for what happens in user departments… Who should be accountable? Me the CIO, or another VP? Is my role to educate my colleagues so that they can set their teams to reap the benefits of IT, or to put my life on the line for benefits which I cannot, normally, commit to? As I defend large projects at the board level, I am careful not to assume responsibilities which I cannot deliver on. This brings me to work a lot with my colleagues so that they will come to understand how IT can deliver value, and their own role in getting closer to that objective.

    That being said, EBITDA is not usually considered as an appropriate measure of value in public sector organisations, such as a university… We will focus on performance measures, and we are looking into measures such as graduation rates.

    Will you be in San Diego to discuss governance issues at the summit?

    Lyne

  • 2 Welcome to the 2012 European Symposium in Barcelona   November 6, 2011 at 12:39 pm

    [...] who do nothing are known as ‘retired’. In the near future, doing your job may be the best way to losing your job [...]

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