“As a result, the business typically focuses on the one metric that they understand — the cost of IT and how to reduce it — and this leads to a continuous cycle of cost reductions,” the report says. “To break this cycle, CIOs must create a scorecard that is:

“Understandable and relevant to business executives. Often IT and the business speak different languages. Server availability, network throughput, help desk call volumes, capacity utilization, and other IT metrics are not relevant to business executives. These types of metrics must be translated into something the business understands, such as availability of business applications or the cost to support a business area. The IT-centric details should be kept within IT.

“Connected to business outcomes. Business executives are concerned with introducing new products and services, improving customer loyalty and satisfaction, increasing gross margins, and growing market share. IT metrics must be linked directly to these business outcomes, specifically demonstrating how IT initiatives contributed favorably to improving these outcomes.”

CIOs frequently ask what IT should measure and report to business executives.

The key, Forrester says, to success is choosing a small number of metrics that are relevant to the business and have the most impact on business outcomes.

The five metrics that meet the criteria for relevance and impact are investment alignment to business strategy, business value of IT investments, IT budget balance, service level excellence, and operational excellence.

These five metrics should form the core of an IT performance scorecard.

Server availability, network throughput, help desk call volumes, capacity utilization, and other IT metrics are not relevant to business executives.

These types of metrics must be translated into something the business understands, such as availability of business applications or the cost to support a business area.

The IT-centric details should be kept within IT.

“Effective programs for measuring and communicating IT performance to stakeholders assume an outward-looking perspective,” Forrester says. “The best place to start such a program is by interviewing key IT stakeholders to first understand their current perception of IT and then what they expect or need from IT to be successful. Ultimately, this defines how they measure IT. Based on the input from these interviews a customer-centric scorecard can be developed. Be sure to review draft scorecards with the stakeholders and get their feedback. Cascade the scorecard to develop the internal metrics that IT will need to execute operationally.”