Let other departments justify their IT use

Divide responsibility for justifying IT spending across the business

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

This was last published in February 2004

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