CIO Enterprise Newsletter
 
NEWSLETTERS
 

CIO.com updates, insights and advice on technology, management and your career.

 CIO BlackBerry News and Tips
 CIO Research and Analysis
 CIO Microsoft
 CIO Insider
 
 
 
LEADERSHIP
 
CIO Executive Programs
The Leader in Face-to-Face Education for Senior Executives

Offering regional and national programs, CIO (and CSO) events bring together some of the most respected names and thought leaders in information technology and security. Presented by CIOs and other senior level executives, these invitation-only programs offer timely topics and strong networking. Learn More »

 
CIO Executive Council
A Peer-Advisory Service and Professional Association for CIOs

Public Council Teleconference: Application Rationalization — Hidden Costs and Smart Decisions

November 17 at 11:00 am US/Eastern (GMT-5)

Join Honorio Padrón, of The Hackett Group, who will share the drivers for companies to tackle application rationalization and the results of research that define the hidden cost of complexity. Additionally, we will discuss key decision milestones—to start or not, holding the course steady and fulfilling expectations.

Virtual Desktop Cost-Benefit Analysis — Michael Jacobs, Catlin Group

The analysis contained in this presentation measures the cost of everything from the machines and licenses to the infrastructure for virtual vs. traditional desktop environments.

Honor your best senior team members - Apply for the CIO Ones to Watch Award

Get well-earned public recognition for your top up-and-coming team members, your IT organization and your enterprise. Award winners will be announced, publicized and feted in May 2010, great timing to help attract new IT recruits to your company.

More / Register »

Learn more about the CIO Executive Council »



 
 
RESOURCE CENTER
 
 
 
 

IT Value Methodologies: Do They Work?

Three experts weigh in on whether IT Value Methodologies can help a CIO's never-ending quest to prove IT's worth.

 

April 10, 2007CIO

For the CIO, it’s the question that never goes away: Can value methodologies really prove IT’s worth to the business? Three experts weigh in on whether this is the impossible dream.

John Boochever
Director, Mercer Oliver Wyman, a consultancy with a focus on financial services and risk management.

Typically, IT value methodologies do not adequately measure, much less prove, technology’s value to the business. There are three explanations for this observation.

First, as a factor of production, any direct correlation between IT spending and bottom-line results is highly elusive. Several academic studies bear this out. One employed competitive economics to speculate that higher returns from IT encourage other firms to enter and drive down profits. Another concluded IT had become a strategic necessity, not a source of competitive advantage and therefore not measurable as such. A third found that higher productivity and consumer value—in fact attributable to IT—did not translate into measurable business profits because they tended to be competed away or passed on to customers.

Our own client work in financial services also suggests that IT spend is not really a distinguishable driver of bank performance today because scale and capability benefits are dwarfed by inefficiencies, cost of complexity and other costs associated with realizing revenue. In other words, looking at relative IT spending does not tell you whether a bank is an advanced or an inefficient consumer of IT.

That’s the economic theory. Then there’s the nature of IT itself. IT is not one thing. It is a complex array of services, some of which are indistinguishable from the business capabilities they enable, such as trading. Others are more like utilities. How do you go about valuing the electricity or water your business consumes?

In the case of business application development, leading practitioners associate the IT portion of their projects with the business portion and do a combined investment case. In the case of IT infrastructure, companies look for cost efficiency, reliability and scale. Very few have a methodology that combines the two, allowing them to value IT investments both in terms of deployment and operations over their lifecycle.

IT valuation techniques have not kept up with the pace of change in technology and management. In IT, strategic planning cycles have sped up and become more iterative. The dotcom era ushered in a place-your-bets and launch-and-learn culture. The “atomization” of technology (many more subcomponents and vendors) also means that no IT department can afford to supply or even be competent in every technology. At the same time, companies don’t want to be locked into a single vendor or approach, with no endgame in sight. They want to avoid creating the legacy environment of the future.

 
 
Loading...
 
RELATED ARTICLES
 
 
 
WHITE PAPERS

Improving the Value of IT to the Company

Strong Investment Governance is the answer to optimizing IT spending and helping stakeholders decide what new investments to make.
 

SharePoint is Dead. Long Live SharePoint

Read this white paper to learn how you can breathe new life into SharePoint and derive a higher return.
 

Exchange 2007 Risks and Mitigation Strategies

This whitepaper will review the strengths of Exchange 2007 and areas where CIOs should consider third party solutions.
 

Solving On-premise Email Challenges

This white paper presents ten on-premise challenges and their on-demand services solutions.
 

Adobe for Business Process Automation

Companies must be able to react to customer demands, competitive threats, and compliance requirements.
 

Increase Customer Satisfaction and Lower TCO

With Adobe® LiveCycle® Enterprise Suite (ES2) software, organizations can easily deploy intuitive user experiences.
 

WEBCASTS

Extending Client Refresh - 11 Steps to Maximize Savings

11 Steps to Maximize Savings
 

CIOs Weigh In On Virtualization

Date: November 19, 2009 Time: 2:00 PM EST

Jim Malone, Editorial Director of CXO Media's C...
 

Beyond Installing ITPM Software: How a global company reduced risk and successfully implemented ITPM

Hear directly from one of your peers who has reduced risk and successfully implemented ITPM in this Live Webcast. ...
 

IT Consolidation Made Easy

The Primary IT Initiative for Reducing Costs
 

Taking a Seat at the Executive Table: The Reality of Virtualization

This year, for the first time, the number of virtual machines is on track to exceed the number of physical machines...
 

Who Are the Data Center Leaders?

Today's data center is still very much a heterogeneous environment. Gabriel Consulting recently surveyed over 250 d...
 

Resource Alerts

Get instant email notifications by topic when white papers, webcasts, and case studies are added to our library.

 
FEATURED SPONSORS
 
 
 
SPONSORED LINKS
 

The Key to Proving and Improving the Value of IT to the Company

Return on Information: Google Enterprise Search pays you back

ROI of Application Delivery Controllers

Making Consumer Two-Factor Authentication Simple and Cost-Effective

Webcast: Unleashing the Power of Customer Data

Disciplined Autonomy: Resolving the Tension Between Flexibility and Control

Enterprise Capture: Your Onramp to Business Process Automation

Cloud Computing--What is its Potential Value for Your Company?

Seven Design Requirements for Web 2.0 Threat Protection

How Consumerization of IT Will Make Your Business More Productive

How does a software company save big with Green IT?

Translate business strategy into IT strategy and obtain maximum benefits.

Unleash the Power of Java with Oracle JRockit Real Time

Taking the Service Desk to the Next Level

Return on Information: Google Enterprise Search pays you back. Get the facts.

VMware. The source for Business Infrastructure Virtualization.

ShoreTel tells businesses to untangle from competitors' complexity and turn to its brilliantly simple UC solution

See how AT&T can help protect your network.

Streamline IT Costs. Boost Performance with WAN Optimization.

Build your 1st app FREE with Force.com

TDWI checklist helps define data readiness for analytics. Download report.

A Clear View Toward Virtualization

Virtualization Technology as a Business Solution

The rules of infrastructure management just changed.

A Clear View Toward Virtualization

Upgrading to VMware vSphere with vWire

Maximizing website Return on Information with high-quality search

Gartner Magic Quadrant, Application Delivery Controllers 2009

Authentication as a Service by Forrester Research

Learn How Web Site Performance Impacts Shopper Behavior

Build a Foundation for Unified Communications

Removing the Barriers to IT Governance: How On-Demand Software Changes the Game

Should Your Email Live In The Cloud? A Comparative Cost Analysis

Learn about the growing threat of insider data theft.

Adobe® LiveCycle® solutions for business process automation

10 Ways Excel Drives More Value from Your SAP Investment

eBook: How Can You Make Your People Productive Anywhere?

Mind the Talent Gap: Global Survey on IT and HR trends and challenges

"Enterprise-Proven" is the Prerequisite for Enterprise SaaS Portal Solutions

AT&T Synaptic Storage as a Service. Expand on demand

Trend Micro ranked #1 against real-world malware. Read more.

Webinar: Jump-start your in-house e-discovery with Ringtail QuickCull from FTI Technology

Top Five CIO Challenges

Read the RSA report: Security for Business Innovation

64-page prescriptive guide to security, compliance, and IT operations.

Increase UPS efficiency without sacrificing protection.

eZine: A Roadmap to Reducing IT Complexity

Reduce risk, gain agility. See how Progress can help your business.

Virtualization Technology as a Business Solution

eZine: A Roadmap to Reducing IT Complexity