Prove that IT pays real dividends

As the recovery in corporate IT spending continues there will be renewed focus on measuring the performance of technology and its...

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.

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