Divide responsibility for justifying IT spending across
the business.
Only 25% of UK IT directors believe that measuring the value of
IT investments is an important part of their job, according to a
survey last month in Computer Weekly.
The findings raised some eyebrows in the industry. After three
years of economic downturn, IT directors have come under increased
pressure to show a quick return on IT investment to the board. The
mantra has become "show me the money", or at least the
cost-savings.
Certainly, the value of IT to an organisation can be considered to
be its contribution to profits. However, IT's contribution can be
measured in different ways, such as efficiency or as a utility - an
essential service such as gas or electricity.
But should the IT director be ultimately responsible for justifying
all expenditure on IT across an organisation?
IT directors have the ultimate job of justifying investment in IT
to their board but before they do so it may be reasonable for them
to expect business units within their organisations to quantify or
confirm the value of the IT solutions they use.
In a retail organisation, for instance, this might involve the
marketing or sales director explaining how a new customer
relationship management system has improved customer retention or
helped to spotlight the most valuable customers to an
organisation.
In organisations with a simple structure - without many foreign
subsidiaries and with a small number of main business units - it
will be easier for the IT director to measure the value of IT, and
break down its costs.
In a larger organisation with a more complex structure IT costs
will vary more and be harder, if not impossible, for the IT
director to keep track of.
In these organisations smaller business units are more likely to
justify their own technology expenditure and operate
semi-independently.
Here the heads of business units can justify how they use IT,
leaving the IT director to focus on long-term strategy. Requiring
business units to demonstrate the value of IT will lead to a much
healthier management structure and make everyone think harder about
the role technology plays within a business.
One crude but effective mechanism for confirming that particular
systems are delivering sufficient value is the threat of removing
them if they are not making sufficient contribution. This may cause
a dysfunctional product to be simply dropped, or concentrate minds
on finding a more appropriate IT system.
This is not to say IT directors should shrug their shoulders when
asked about how IT adds to the bottom line. The business benefits
of technology will always be at the forefront of IT chief's
thinking, it is just that in many cases it is more practical to get
heads of business units to provide a detailed explanation of how
the software and hardware works for them.
IT directors can then focus more clearly on moulding future IT
investment to the needs of their organisation and still keep an eye
on how money is being spent across a business.
Owen Williams is head of IT at global property
firm Knight Frank
