The first step to determining and measuring value is to create categories for your company's business goals and then prioritize your IT initiatives within them.
During the mid-1980s, a famous TV commercial in the US ran with the punch line: "Where's the beef?" Roughly at the same time, surveys of the nation's technology leaders found business executives and CIOs both asking: "Where's the IT value?" Twenty years later, that same question is still being asked - but not for lack of ways to measure it.
You would expect, given the Balanced Scorecard, real options analysis, business case analysis, portfolio management and all the other ways to compute ROI than there are lottery game choices, that IT value would be well understood by now. But that's simply not the case. There are as many reasons for this as there are options. But one key factor is that most people skip the important step of defining just what it is they're measuring. Before you can leap to quantifying value, therefore, you must first focus on identifying what kinds of processes are of true business value to the organization. Just what are the business needs you are seeking to support and drive? The precursor to this value quantification is value "categorization". Once you have your enterprise's value categories identified, then you have a new and powerful basis for describing where IT investments are going and measuring their true value in terms your business peers can understand.
Today, most CIOs communicate IT value and finances to their internal business customers by reporting spending on applications development, maintenance and infrastructure. Instead, imagine if CIOs reported on what is spent on growing revenue, retaining customers and complying with regulatory demands - that's what value categorization enables. It increases transparency and provides a sound basis for measurement because it gives CIOs the tools and the terms that the business understands. For instance, what if the CIO reported spending $30 million on operating expenses for maintenance? That sounds bad. But if the CIO were to change the terminology by showing more precisely how these expenses are supporting the development of new products, then they would be using terms that the business side can actually understand. The "beef" in value categorization has to do with finally being able to link IT to where and how the business value of IT shows up. Those that have taken this approach are now experiencing tighter business to IT alignment, more effective IT investment planning and overall IT transparency.
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