You can’t miss it. It is all around us. The noise, I mean. “Maximize the value of your IT investments” or “Get the biggest bang for your IT buck” or “how to get IT to do more for less” interspersed with “improve IT ROI” or “better IT ROI”.
Reminds me of a joke in which a home is being burglarized and the lady of house admonishes the man of the house to action: “Don’t just stand there; do something”. And the man’s response? He breaks into a song and dance routine.
Well, IT ROI is the IT community’s song and dance in response to the business’ question: is IT delivering value to the enterprise?
Funny or not, the joke is on us. A lot of time and effort is being expended on something that will not generate the desired results. The irony is that in some cases this focus on IT ROI will produce the exact opposite of what we want to achieve.
Don’t get me wrong. There is nothing wrong with the objective. It is the means that I am questioning. The means to better IT value is not to measure and track IT ROI. To the contrary, IT ROI is one of the most flawed measures of IT value.
ROI is a financial metric designed for a specific purpose. Applying it to an internal investment such as IT is counterproductive.
For the sake of brevity, we will focus on only a few reasons.
What about the risk?
The focus of ROI – return on investment – is on the IT investment and its return. These calculations do not factor in risk. Risk is what derails the best “promise”.
Let us say we have an IT Project proposal that will generate excellent ROI – small investment leading to a large return. Should we act on this great “promise”?
Before we do, let us ask ourselves the real question - can we pull it off?
Answering this question is acknowledging the risk that our IT ROI calculations completely missed. If we acted without assessing the risk, then we deserved what we got.
Bottom line, ROI should not be applied in isolation.
Some things cannot be measured…
…like the “revenues” or “cost savings” produced by a new IT project!
Have you ever heard of those business cases where the “payout” is described in great detail down to the last cent? Have you ever seen any of those promises fulfilled? I haven’t.
No, people are not deliberately misleading. They are the victims of “irrational exuberance”, on the one hand, and the IT ROI pressure, on the other, to ignore ground realities.
IT projects, like other adventures known to mankind, are dependent on many things – a lot of them outside our sphere of influence. Providing precise dollar amounts on future results – some projected as far as 3-5 years - is ignoring this fundamental fact.
It is a business truth, most business leaders will admit to: at any given time, we know a fraction of what we do not. And what we do not know can, and often does, overwhelm and negate what we know.
IT Strategy: IT Cannot be a Profit Center (Friday, September 08, 2006) IT Strategy: Of late, there is a lot of emphasis on IT ROI. While this is commendable, extending this argument to convert the IT Organization into a profit center is taking it to another extreme. For example, are HR, finance, and marketing profit centers? Why not?
IT Value Mapping (Friday, September 08, 2006) Why do some IT organizations create unprecedented shareholder value, while others earn the contempt of their business leaders? It is no secret that aligning IT with business improves IT ROI, what is often in doubt is how to make it happen. Can you say with certainty that your IT is aligned with business? Can you prove it? If improving IT ROI is an imperative for you, read on. This paper will show you how to improve ROI by 10% or more…and
IT Strategy Course (Friday, September 08, 2006) At the end of the day, most business leaders agree that alignment is critical, but they don't know how to achieve that goal. This course discusses the challenges of aligning IT with business in depth and presents a differentiated approach and framework.
IT Strategy Framework (Monday, September 25, 2006) IT Strategy requires a process and a framework. The former provides the steps and the latter the toolkit. Together they help an organization get to an IT Strategy that maximizes IT ROI. This article addresses the latter.
What is IT Strategy? (Saturday, October 14, 2006) There are many definitions of IT Strategy. Which one is true?
Help! We are being treated as a cost center! (Wednesday, October 18, 2006) Let’s face it. An IT organization that has to justify its budget as a “cost center” has lost the respect of the business community somewhere along the line.
Talk to Me: The Disconnect Between Business and IT (Monday, May 07, 2007) The disconnect between business and IT is often lamented. A lot is spoken and written about this chasm. Ostensibly, a lot is done to bridge it. Yet, most would agree the chasm still exists.
Achieving and Sustaining Business and IT Alignment (Thursday, November 16, 2006) This article was originally published in 1999. However, it is on the money even today. Authors Jerry Luftman and Tom Brier walk through the issue of business and IT Alignment with specific examples and advice on how to achieve this goal. A must read!
Enterprise Information Systems Strategy and Planning (Thursday, November 16, 2006) Porter (2001)’s proposition of the evolution of technologies in business emphasizes the need for
information systems strategies to enable the real-time optimization of the value chain. It is echoed throughout the
literature that information technology strategies need to be aligned with business strategies. This paper proposes a
framework for the development of information systems strategies and plans driven by business objectives and
strategies. It provides an integrated framework for the development of technology architectures and business
processes across the value chain. A systematic approach to enterprise information system planning is presented.
7 Steps to Business and IT Alignment (Monday, November 20, 2006) No business will ever reach the goal of “business and IT alignment”. Should this discourage you from pursuing business and IT alignment? NO! It is a worthy goal to pursue. Indeed, it is a critical one to pursue. You might never reach alignment but you can take steps to get ever closer. This requires a process. Often, we ignore the fact that business and IT alignment is a process. This process does not have a starting point nor does it have an end. It is a series of “learn and do” cycles that incrementally get towards alignment. Let me explain.
IT Strategist's Dilemma (Saturday, December 09, 2006) Every strategist faces the "stay the course" or "cut and run" choice, at least once in their careers. How do you decide which course is the correct one? More, importantly, is this even a correct or complete set of choices?
IT Strategy Template (Friday, January 12, 2007) Enclosed is a simple template to create an IT Strategy for your organization. This is intended to be the starting point not a definitive or exhaustive workbook on creating an IT Strategy.
It's not just IT, it is Your Brand (Monday, January 22, 2007) When we talk about "business and IT alignment", we often forget about the elephant in the room - the impact of IT on brand. This article discusses the connection and provides examples of how IT can help or hurt your brand.
Part II: Start smart. Your first step could make your journey! (Monday, February 12, 2007) Last week we looked at the importance of the IT Strategy "kick off" communication and the 5 questions it must address. This week, we will discuss each of the 5 questions and how to answer them for success!
7 Signs of Trouble in Paradise (Monday, February 26, 2007) Ever wonder what happens when business and IT are not aligned? Well, like most other things in life, there are symptoms of misalignment. Monitoring them and analyzing them can help you avert disaster.
Part II: A Framework for IT Value (Monday, April 09, 2007) Last week, we lay the foundation for a discussion on IT Value. This week, we look at specific areas where IT creates value.
Part IV: A Framework For IT Value (Monday, April 30, 2007) Last week, we discussed the cost dimension of IT Value. This week, we will discuss the time to market dimension.
Rethinking measurement: More than evaluating performance (Monday, June 25, 2007) Management should focus on using measurement frameworks that show the hypothesized relationships between desired outcomes and the drivers (or leading indicators) of those outcomes; what's more, developing the right measures and using measurement data must be iterative and highly interactive.
Talk to Me: The Disconnect Between Business and IT (Tuesday, May 08, 2007) The disconnect between business and IT is often lamented. A lot is spoken and written about this chasm. Ostensibly, a lot is done to bridge it. Yet, most would agree the chasm still exists.
Focus on Customer Service (Monday, May 14, 2007) Is it time to relearn the no.1 rule of business? Some airline companies seem to have gone back to school. Unfortunately, this was an expensive education because their customers took them there!
The Importance of Risk Management (Monday, June 25, 2007) A very good discussion on the importance of risk management. The content is rudimentary but the discussion fundamental to IT Governance.
Proactive Risk Management (Monday, June 25, 2007) A stitch in time...proactively managing risk can make all the difference between success and failure.
Kiss and Make Up (Tue, 26 Jun 2007 00:00:00 -0500) Industrial manufacturers often have strained relationships with their IT organizations because manufacturers demand better IT support while simultaneously targeting IT for not cutting costs. Some companies have successfully emerged from this predicament using a lean, best practice model which we call "the 1 percent IT organization." This means IT has a cost structure approaching 1 percent of revenue. An IT organization that can transform its operating model to act as both cost center and strategic enabler will be poised to manage both the cyclicality of the present and the growth needs of the future.
Is Your Company World Class in IT? (Monday, July 09, 2007) Metrics make us feel secure because of the implicit promise of control. However, metrics are as meaningful as the spin surrounding them!
Measuring IT Value Using Intel's Business Value Index (Friday, August 17, 2007) Want to measure the value of IT? Intel has proposed a solution based upon its "Business Value Index." Attached is an introduction to the methodology
Avoiding the Alignment Trap (Sunday, September 09, 2007) Alignment is an issue but are you focused on the right strategy to fix it?
The Ultimate Proof of IT Value (Friday, October 19, 2007) A study proves the bottom line impact of IT investments. Case closed? Hardly!
Primer on Project Management Metrics (Thursday, October 25, 2007) What you can't measure you can't manage. The attached article provides a good primer on metrics.
Enabling the Strategy Focused Organization (Monday, January 14, 2008) Is IT Value compromised because of the strained relationship between business and IT? How can the CIO overcome this challenge?
IT Strategy: Does IT Matter? (Monday, February 04, 2008) This paper presents results from investment in IT at a macro economic level. Proof positive that IT Matters? You decide.
IT Strategist as a Race Car Driver? (Tuesday, February 12, 2008) Learning from Mario Andretti sounds like fun but what has that got to do with IT Strategy? Read on!
Mission Impossible: Demonstrating the Value of IT (Monday, February 25, 2008) CIOs are caught in a vicious circle of "cost cutting" begetting more cost cutting expectation! How can you get out front and demonstrate IT's value?
Measuring Information Productivity (Monday, March 03, 2008) Excellent paper on IT value measurement. This framework powered Baseline's 500. Very informative.
Influences on IT Strategy (Monday, March 03, 2008) Excellent overview of IT Strategy and things that have an influence on its outcome. Must read!
IT Strategy For Business Value (Monday, March 10, 2008) The paper presents a framework for developing an IT Strategy for business value.
IT Strategy Framework with SOA (Monday, March 10, 2008) A very good presentation that takes IT Strategy to solutions architecture using SOA. Good read!
Developing an IS/IT Strategy (Monday, March 17, 2008) A very good presentation on developing an IT Strategy. Must Read!
A Framework for Developing IT Strategy (Monday, March 17, 2008) A very good discussion on developing IT Strategy including detailed steps and explanations. Must Read!
IT Strategy for the Law Firm (Monday, March 17, 2008) A presentation on the challenges facing CIOs at law firms and how to create an IT Strategy to overcome them.
Cracking the IT Value Code (Monday, March 24, 2008) Does IT Spending Matter? The answer is an emphatic no. Then what does? Read on...
Understanding the Value of IT (Monday, March 24, 2008) Understanding the IT Value equation is critical to making IT Decisions. This article provides guidance using the education industry.
Measuring IT Success at the Bottom Line (Monday, May 05, 2008) IT business value (ITBV) program provides a customer-focused, data-driven IT investment decision making process and framework for measuring and evaluating IT products, services, and support in terms that reflect business benefits. Read On...
A Primer on IT Business Case Development (Monday, May 12, 2008) This primer provides tools, concepts and a framework for addressing a number of critical challenges facing enterprise information technology (IT) organizations.
Managing IT For Value (Monday, May 12, 2008) "We conclude that no existing method is suitable for assessing the business value created by IT assets." Read On...
Managing for Shareholder Value in difficult times (Monday, June 02, 2008) Is there "managing" to anything else? Read this excellent discussion on how everything in an enterprise should be managed.
Beyond EVA (Monday, June 23, 2008) A good discussion on EVA and how to plug its shortcomings.
Case Study: Strategic Use of Information Technology (Monday, July 07, 2008) Can you imagine a world without Google? I for one can't imagine one without Microsoft. Microsoft's bugs make Google indispensible!
The History and Future of Value Management (Monday, July 07, 2008) An excellent presentation on measuring and managing "value" - discusses various frameworks. MUST READ!
A Framework for Strategic IT Alignment (Monday, September 15, 2008) Is IT Alignment a strategic weapon to gain competitive advantage? Duh! But do you know to what extent information intensity affects competitive advantage? Hmm...
DAM/VAM: A Structured Methodology for Developing and IT Strategy (Monday, November 17, 2008) Demand and value assessment methodology is a structured approach to quantifying the demand for and the value from IT investments. This guide provides a step-by-step approach to implementing DAM/VAM. Excellent Read!
Rss