Notes on the CIO report on how to measure IT value www.cio.com Feb. 2001:
IT executives feel that measuring IT value is an important but very few have confidence in the reliability of their value measurements. The challenge is "finding the tangible equivalents of intangible benefits." IT is "creating something new to the organization and has nothing to compare new projects to in terms of cost, return and lead times".
Financial metrics prevail with most value assessments focused on return and cost of ownership. Customer satisfaction, internal as well as external, and soft benefits are being considered.
IT executives take a customer service approach to proving their worth. "…IT is essentially a services organization…. and any service organization has to measure the results of that service."
Changing perception of IT by:
"Management has to understand that IT and business strategy are not two separate things, IT is the heartbeat of the company's strategy."
86% feeled that measuring IT value is an important or an extremely important priority.
55% indicated that measurements were somewhat reliable to reliable.
IT executives are measuring IT value more frequently than a budgeting cycle requires. 58% said measuring IT value is a requirement for all new IT initiatives. They are are seeking funds for investment beyond the annual budgets and are not being "straight-jacketed" by traditional budgeting cycles.
Discussions with other executives about IT value occur fairly frequent as well, with 57% of respondents having these discussions monthly or quarterly.
IT is still viewed as cost center, and not a value center, in 70% of the companies.
Metrics or methodology used to measure IT value:
Return on investment (ROI) at (41%). Total cost of ownership (TCO) (29%) and internal rate of return (IRR) (14%). in that order. Factors were included in value equations are respondents listed costs and expenses (85%), productivity (67%), external customer satisfaction (55%), soft benefits (48%), uptime (46%), and revenue (45%) most frequently.