IT Value: What It Really Means
What's IT worth? If end users are to understand, says our columnist, you have to tell them exactly what they get for their money.
CIO — Here in December, some of you are sighing with relief that your budget process is over. Others are down to the wire and still haggling.
But all who remember how painful the budget process was understand that a CIO's negotiating power is, to a great extent, determined by how well clients understand the value they get for the money. There are three components to the concept of value: understanding exactly what IT delivers, believing that the cost is fair and evaluating the contribution of those deliverables to the bottom line.
Let's look at what we can do to build clients' understanding of the value of IT.
What Do We Get for the Money?
In many cases, clients' poor perception of IT value is as basic as not understanding the full bundle of products and services that IT delivers.
Sure, everybody knows that IT delivers essential services like desktop computers, network services, applications engineering and applications hosting. But that sounds simple. Many clients don't understand why IT has to cost so much just for that.
The problem is, many IT departments don't clearly define the specific products and services they deliver for a given level of funding. Typically, there's a lot more in that bundle than clients know. When the specifics are defined, clients come to understand why IT needs the budget that it does.
Explicitly defining IT's products and services also counters the less-honest outsourcing vendors who glibly offer to do 50 percent of what internal staff do for 80 percent of the cost, implying a 20 percent cost savings. One can see the fallacy in that claim only if IT can clearly define all the products and services that it delivers.
There are two steps required to understand the exact list of products and services that the IT budget pays for.
First, IT must publish its product and service catalog. The catalog must be comprehensive, and at a level of granularity that portrays specific client purchase decisions. It's not sufficient to define high-level categories, which don't portray all the many things IT does within each category. For example, "e-mail" is too broad. A fully defined catalog would distinguish a basic e-mail account, extended storage and BlackBerry forwarding as three distinct services.
Second, IT must define exactly what subset of that catalog the budget pays for, and in what quantities. For example, it might forecast the cost of basic e-mail for everybody, extended storage for only the customer service department, and BlackBerry forwarding only for executives. And it might forecast the cost by application for each major project, for necessary repairs and patches, and for discretionary enhancements. Breaking out the budget in such a way makes it clear exactly what IT delivers (and, by implication, what it doesn't).
