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An IT value sampler for the holidays

by Mark P. McDonald  |  December 19, 2012  |  1 Comment

It is the holiday season and the time for samplers.  Recently a friend sent me a candle sampler as a holiday gift – a box of assorted chocolates.  That got me thinking about the collection of ideas that we offer to each other and exchange.   So here is a sample that I offer to you all around an issue we all face.

Value derives from one of four sources.  Two are common to business IT: solving a problem or enabling an opportunity.  The other two sources are more common to consumer products: how people look to themselves or others and how they feel about themselves and to others.   The combination of these four sources defines the nature of value.

IT will not create value unless it understands its production function, or the reasons why IT or any other function/resource exists.  The production function of IT has changed as IT moves beyond automation, integration and enablement.   What is the production function of IT

Understanding IT’s production function sets the context for IT value, but not how an enterprise realizes IT’s value in the enterprise.  IT business cases and investment strategies seek to measure an immediate connection between IT investment and IT value.  The only problem is that the value of IT exists over time not at any one point in time. Recognize that and you can begin to properly define how technology raises business performance.

The nature of IT is changing as innovation and investment are moving IT structures from private to private.  This changes the nature of IT value, which should inform business expectations and IT strategy.

IT is a blend of transformational and operational investments.  With the majority of IT resources concentrate on operations leading people to view IT as a cost based service rather than a strategic resource.  How do you measure the value of infrastructure and operations?  Well by recognizing that infrastructure is among your most productive resources, if only you consider infrastructure in another way.

IT is complex which makes measuring it complex.  IT metrics and value measurement have become a cottage industry, but not all metrics are the same and while everyone measure a core set of internal metrics, leaders measure IT’s external impact making them the best metrics.

IT as a percent of revenue is a common metric, one that is assumed to be the best metric for comparing IT performance across companies and with the company’s past.   Unfortunately IT budget, as a percent of revenue is largely meaningless as a management or value metric for IT.  So is there one metric that best demonstrates the business value of IT?  Perhaps there is a metric that measures both IT’s operational impact and how IT leverages that performance.

A sampler would be incomplete without a few extras, so here is a final post about the 12 things every business leader needs to know about IT. 

So here is a sample of some prior posts on the connections between information technology and business value.  Please accept this with my best wishes for Holidays and the New Year.


Other value related posts

Business value is in your hand – the five questions to ask to create a compelling case for change.

Comprehensive value defines broader goals for organizational leadership and management

Thinking small means thinking of value

Thinking Small — Creating value rather than controlling costs

The Real Value of IT: a Book Review

Category: 2013  amplifying-the-enterprise  management  strategy  

Tags: 2013-planning  it-and-business  it-leadership  it-management  technology-leadership  value-of-it  

Mark P. McDonald
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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