As the recovery in corporate IT spending continues there
will be renewed focus on measuring the performance of technology
and its impact on profits.
But despite the higher profile of technology within business over
the past 10 years, measuring its performance has remained a
difficult task.
One common method to demonstrate the value of IT uses a concept
known as the balanced scorecard. This usually involves software
from suppliers such as SAP and Hyperion that scores the performance
of departments, business processes or technologies against a range
of criteria.
Research company Forrester has set out four criteria under which IT
might be judged: user orientation, IT value, operational excellence
and future orientation (see box).
George Lawrie, senior analyst at Forrester, said firms will
prioritise different criteria according to the type of business
they are in.
"A company that does a lot of innovation or customises what it does
for each client will prioritise flexibility [of IT] over a
standardised approach," he said. "But if you need to watch every
penny, then you try to have sets of rules and have a stringent
approach and strong governance."
Other types of businesses will rely on IT systems to develop new
products or services quickly. "Investment banks need to develop new
systems for new derivatives or exotic financial products," said
Lawrie. "IT will work within the line of business and get bonuses
paid, even if they throw the system away. It is time to market that
counts over standards."
John Handby, chief executive of CIO Connect, a network of IT
directors and research organisations, said balanced scorecards
could be useful for IT departments but only if the right things are
measured.
"It makes good sense to have a metric-based approach, and balanced
scorecards are a good way to do that," he said.
"It is important that you should reflect things like availability
of systems, but get some kind of involvement from the user
population. There is no "availability" metric but it is important
that you reflect the users' views.
"It is not just the scoring, it is the discussion around that - I
have seen it used very positively and have seen departments able to
raise their scores."
To ensure a system does not become an exercise in ticking boxes, IT
departments should consult with business staff, added Handby.
Balanced scorecard criteria for IT
User orientation How should IT appear to the users?
- Mission: to be the supplier of choice for all information
services.
- Objectives: user satisfaction, IT/ business
partnership, service level performance and responsiveness to
business needs.
IT value
How should IT appear to senior management to be considered a
significant contributor to company success?
- Mission: to enable and contribute to business strategies
through the effective application of IT.
- Objectives: to show contribution to strategy and the business
value of IT projects.
Operational excellence
Which services and processes must IT excel in to satisfy the
users?
- Mission: to deliver timely and effective services at or under
budget and service level agreements.
- Objectives: process excellence, responsiveness and good project
management.
Future orientation
How will IT develop the ability to improve to better achieve the
IT and company strategy?
- Mission: to develop internal capabilities to learn and innovate
to exploit future opportunities. l
- Objectives: improving staff effectiveness and research into new
technology.