The FT on Monday had a front page article, the gist of which was that companies didn't know what value they got from their IT spend.
This is the front page article... "Big spenders reveal..."
...and this is a more detailed piece on p26: "Big spenders are brought to book..."
I was reminded about these articles by a letter in today's FT which responded with three points: first, how do you define IT spending, second even if you knew how much you spent how would you know whether this is 'right', and third, how do you measure benefits.
My own view?
First, what a coup for Micro Focus, who commissioned the survey. With an annual turnover of $172m this is a fantastic piece of 'free' advertising.
Second, whilst 70% of respondents said they knew how they were spending on core software assets, we will never know how many of them were right. I don't believe for a moment that 70% of companies really know.
Third, to the 48% that tried to quantify the financial value of all their IT assets my response would be good luck, but I'm with the 52%. I'm left with an image of complicated spreadsheets underpinned with swathes of assumptions, that produce the 'answer' that 'yes, IT does add value'.
I do think you can quantify the value of IT in some cases, but in others you can't. The trick for a CIO is to recognise the best approach to articulating potential value to support cases, or real value to present results. For that you need a whole range of approaches. I'll add a list of mine in a few days.
Comments (1)
I think helping the business understand the value of IT is difficult. By and large the business will view IT as a dark and expensive art that to some degree they take for granted until it isn't there.
I feel business would like IT to be a nice machine worked in such a way that people type information at the front, press enter and then £10 notes start leaping out the back....if only.
Some IT benefits are very quantifiable and others aren't. For example how does one work out the financial value gained from investing a large sum in the development or purchase of a Contacts Database?
The real challenge in implementing such a system is in creating sufficient change in the business culture to make sure the system gets used. Even assuming this is possible how can you measure the financial benefits resulting from use of such a system as most of them are likely to be indirect.
Performance measurement perhaps, measuring take up of use within the organisation through analysis of the usage logs. All good stuff but still not easy to convert into figures to show how much such a system contributes to profit.
Individual projects can have a business case built, each on its merits, some quantative, some qualitive. Each project can take an awful lot of time to analyse. When trying to build a strategy covering a number of bases it is not entirely practical to cover each element in such detail.
For me the route to partial success is as follows.
1)Educate the board in broad terms and
present the soft and estimated financial benefits clearly without jargon.
2)Explain how the business might be held back if it did not undertake a particular project.
3)Establish a reputation for delivering what you say you will deliver.
4)Find a way to measure the benefits of solution after it is in place and operating. Most other parts of a business measure the results of the work they do, and although it is more difficult for IT we must do the same if we are to achieve credability. This is particularly important where we introduce new software...it is not just about producing helpdesk stats.
5) Share the results, and next time you make a strategic pitch you will have a track record of being able to demonstrate that you can measure the results of what you have put in place...
Ultimately the business is not going to ferret around to understand the benefits to financial results and ROI from systems, the opportunity to do this lies in our hands....
Posted by Philip Van Enis | October 15, 2007 3:16 PM
Posted on October 15, 2007 15:16