BizAnalyst Network: Apply New Metrics to Measure IT's Business Value

Monday, June 04, 2007

Apply New Metrics to Measure IT's Business Value

Businesses Apply New Metrics in Measuring IT's Value

Old metrics like ROI are still necessary, but they don't tell the whole story. So some CIOs are exploring new ways to demonstrate IT's value to the business.

AT IT BUSINESS EDGE:
• Companies Wasting Ten Percent of Employee Time Looking for Information
• The Team at the Top
• IT Workers in Demand

Return on Investment and other staples of IT metrics aren't likely to disappear. Yet those traditional metrics don't always get you where you want to go with IT/business alignment. Some CIOs are shaking things up by adding new measurements, some of which you may find a bit unusual. For instance, one CIO measures how many times IT personnel go on sales calls. Another strives to improve IT's value by setting a "benefit per developer" goal of $450,000 by 2009. The metrics vary so widely, you may wonder how these ideas can be applied to your company — and that's just the point. To successfully measure how you're helping the business, you should start by looking at the company's unique business strategies and then establish metrics that support those strategies.

Measuring Up: How to Prove IT Value
Measuring and monitoring the benefits delivered by IT is becoming more important in enterprises, and many CIOs find that established financial measures such as ROI and total cost of ownership don't cut it. Traditional IT metrics such as system availability and transaction response times are a necessary part of good IT governance, but they do not express benefits in terms business execs can understand. Business and IT must work together to establish meaningful metrics, agree several analysts interviewed for this article. Tips for doing so are offered, complete with real-world examples. Short on time? Scroll to the end, where the article is nicely summarized with a concise list of best practices.

How to Create Stronger Value Propositions
Metrics offer a great way for companies to attract the attention of potential customers, and they work equally well when it comes to keeping current customers happy. This article suggests using metrics such as: How much did sales go up? What kind of savings were realized? How much did you lower the cost of goods sold? Don't round the numbers; the more specific the number, the more credible it appears, the article says. If you lack such specific metrics, consider using industry statistics to your advantage (there are always plenty of those to go around), extending customers' existing business metrics, or asking your customers to help you create benchmarks. It's important to not get too technical with metrics; highlight the business impacts instead.

More reading on this subject:
Push Your IT Value or Suffer Suspicion :: WhatPC?
July 2006 Survey: What's the Value of IT? At Many Companies, It's Just Guesswork :: CIO Insight

IT, technology management, technolgy strategy, business strategy, metrics, technology risk, ROI, VaR, value added

Labels: business strategy, IT, metrics, ROI, technolgy strategy, technology management, technology risk, value added, VaR