Sidebar: The Cloudy World of App Spending

When IT's investments are calibrated against business value, what's usually being measured is infrastructure. But what about the apps?

Much of Howard Rubin's research into IT intensity has focused on infrastructure spending. That's mostly because that's what companies have benchmarked over the years. But infrastructure spending is also easy to monitor over time because of its ongoing, lasting effect on operations. Application deployments, on the other hand, are typically managed as projects and are not tracked as rigorously or consistently, says Scott Holland, senior business adviser at the Hackett Group. So it's easier for CIOs to apply Rubin's IT intensity research to how they invest in technology infrastructure or IT as a whole, rather than apply it directly to their application portfolio.

"The infrastructure view is how effectively and efficiently you can provision standard technologies," says Scott Abbey, CTO of the financial services giant UBS. "Applications are about how well you're supporting a specific business with a specific technology."

Rubin admits that much of IT's business value comes from applications, not infrastructure. Infrastructure is important, but it's about making sure those value-adding apps can run. "Applications have a huge ripple effect on the organization," concurs Holland, even though calculating that effect is hard. "It may be difficult to have benchmarks on specific functions to help guide your strategy," concurs UBS's Abbey.

Compounding the difficulty is the issue of assessing the impact of project management on application deployments, as that typically involves both IT and business efforts, says one IT finance manager. "We tried Balanced Scorecards, with mixed results," he notes.

Because there's less data on how application spending (as opposed to infrastructure spending) contributes to business performance, CIOs need to rely more on their judgement than on their metrics, Rubin acknowledges. But CIOs should at least understand that the two will need separate spending and management strategies - and perhaps even have separate lieutenants better skilled in each area. "That's why some organizations separate their application costs from their infrastructure costs," says Bernard "Bud" Mathaisel, CIO of Achievo. "Still, it takes a deep understanding of causality to understand what's going on," he adds.

- G GRUMAN