Mary K. Pratt
Contributing writer

4 steps for proving IT’s value to the business

Sep 26, 2022
Business IT AlignmentROI and Metrics

CIOs have long struggled to effectively demonstrate the value of IT to their business colleagues. Now more than ever, it’s imperative that IT leaders learn how to do so.

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David Vidoni wants to be sure that workers throughout his company know “how IT can transform the business.”

Vidoni, vice president of IT at tech company Pegasystems, gets the word out using various channels, from reports on metrics to easily accessible dashboards.

He also launched a quarterly newsletter that — in addition to sharing tech tips, information about available technology tools, and new initiatives — showcases how IT is improving company operations.

“It’s about making sure there’s universal awareness of the work we’re doing, how IT impacts individual employees and departments, and how IT helps us operate better as a company,” Vidoni says.

“It’s another level of engagement, to put IT stories into context and make them available for all employees in terms that are meaningful to them,” he adds. “We want this newsletter to bring more visibility to what we’re doing, how IT helps the business and how IT aligns to our [corporate] strategy. It helps raise awareness on the value we’re delivering to them.”

Vidoni’s actions get at a longstanding challenge for CIOs: How to effectively demonstrate the value of IT.

And it’s a pervasive issue. Research firm Gartner found 63% of surveyed CIOs struggle to communicate IT’s value; 14% of them said they’ve rarely succeeded in the task.

Similarly, Info-Tech Research Group’s CEO-CIO Alignment Diagnostic survey found that 80% of CIOs and CEOs experience frustration with IT’s failure to deliver value, even as C-suite leaders rank delivering benefits as the most important goal for IT.

Vidoni says a newsletter helps him escape being part of such statistics, noting that while that approach is working for him, other strategies can prove to be just as effective for CIOs.

Indeed, researchers, CIO advisors, and experienced IT executives say CIOs need a multipronged strategy to demonstrate the business value of IT and show how much IT positively impacts business outcomes.

“CIOs are finding out what value actually means, they’re tracking it consistently and they’re directly linking back to improvements, to the various initiatives and tasks, and they’re saying, ‘Here are the numbers to prove it,’” says Info-Tech Research Group principal research director Ross Armstrong.

Here are some steps IT leaders can take to ensure IT gets the business cred it deserves.

First, ensure business-IT alignment

Multiple experts say CIOs who want to more effectively communicate how IT brings value to the business must first actually deliver that value.

“It’s much more powerful to deliver value, not talk about it,” says Andy Sealock, a senior partner at consulting firm West Monroe.

That, though, remains a challenge for many. Info-Tech Research Group, for example, has found that two-thirds of CIOs are misaligned with their CEOs when it comes to the target role for IT.

“The role of an IT leader is not to provide technology but to enable the delivery of business value and benefits through technology,” Armstrong says. “So the challenge is for the CIO to understand what the business actually needs when it says, ‘You need to deliver value.’”

CIOs have been getting that message for a while now, Armstrong says, but many have yet to live it. He points to Info-Tech data that shows only 25% of business leaders in struggling IT organizations believe IT has an effective understanding of business goals, whereas 72% of leaders in expanding and transforming organizations believe IT understands goals effectively.

Larry Wolff, who as founder and CEO of the consulting firm Wolff Strategy Partners has long focused on what he terms “the IT value journey,” says CIOs who want to leap into that latter category of transformative IT departments must do so by first building credibility among their business-unit colleagues and earning their trust and respect.

That means delivering the fundamentals flawlessly, identifying opportunities to enhance business operations, and developing programs that transform them.

“If you’re all in [the] maintaining [category], then you’re not delivering value. So boost that by enhancing IT services — for example, by delivering better services at a lower cost or getting to software and infrastructure upgrades. And then partner with business leaders to build transformational projects that will put dollars on the top or bottom line,” Wolff says. “IT will always be doing some maintenance and enhancement but also hopefully doing some level of transformation. So what you’re talking about here is a shift in the balance, where you’re able to continually do more transformation that has a positive ROI.”

Deliver business outcomes, not IT projects

Bobby Cameron, vice president and principal analyst at research firm Forrester, says the majority of organizations still talk about funding IT projects. He advises funding specific business outcomes instead.

That, however, requires CIOs and their IT teams “to plan, manage, and report in business terms,” Cameron explains. And it requires business function leaders to become and remain engaged with the initiative, too.

Cameron says this approach means executives — including the CIO — must identify and articulate how exactly the technology supports a business objective. That in turn helps everyone involved understand the raison d’être for the technology, and it allows everyone to identify whether and by how much the endeavor succeeded.

He cites the case of a CIO at a b-to-b property casualty company who unsuccessfully lobbied for money to upgrade her tech stack to increase resiliency and speed. The CEO denied the request because he felt the legacy technology still worked. But the CIO got the CEO’s approval and executive suite backing when she shifted the project’s focus, saying it was designed to support sales and marketing objectives that could demonstratively improve revenue and profitability.

Thomas Phelps, CIO and senior vice president of corporate strategy at software maker Laserfiche, has a similar take.

“Where CIOs may struggle is communicating how a new digital initiative creates business value in a way that resonates with the C-suite and board,” he says. “Similar to a Shark Tank pitch, put yourself in an investors’ shoes and speak in the language that the C-suite will respond to. Be ready to explain in a few minutes — and with the right set of visuals and compelling storytelling — how a digital initiative could increase revenue, reduce costs, mitigate risks or otherwise lead to a desired business outcome,” he says, noting that even something technical like a containerization initiative, which typically doesn’t garner interest in the C-suite, could gain traction when it’s positioned as key to a specific business outcome such as cost reduction.

Identify IT metrics that demonstrate business success

IT has conventionally used metrics that measure how well technology performs but do little to show how much it supports business outcomes, so Cameron and others advise CIOs to find more business-oriented ways to quantify how technology delivers.

Cameron says he believes objectives and key results (OKRs) are effective for demonstrating how technology delivers business outcomes.

Benjamin Rehberg, a managing director with Boston Consulting Group and leader of its Technology Advantage practice in North America, also endorses the use of OKRs.

Rehberg explains that OKRs describe what CIOs are trying to do and enable them to measure whether IT achieved its goals, by how much, and the impact of those achievements. For example, one objective could be to reduce the time required to run a transaction by a certain percentage, with the OKRs showing how close IT came to hitting or exceeding the target and what its performance is worth.

Mark Taylor, CEO of the Society for Information Management (SIM), a professional association for CIOs and IT leaders, says return on investment (ROI) and other financial measures of a technology initiative’s success — such as how much it boosts revenue, increases profitability, or decreases costs — are just the start.

He says CIOs can and should now quantify how technology initiatives impact other business functions — for example, how much it speeds up closing a deal and how much additional “stickiness” it creates in customer relationships. CIOs can even use business-outcome metrics such as days sales outstanding (DSO) to show the value of back-end technology like an enterprise resource planning (ERP) system, Taylor says.

“Those are all measurements that technology can impact, and it’s incumbent on the tech leader to know them,” Taylor says, noting that systems today actually enable CIOs and business-unit heads to collect the data for a much more expansive list of metrics. “You have to demonstrate the value of IT in a way that’s measurable, and the technology will help you measure some of the things we’re talking about.”

Juan Perez, CIO at Salesforce, also believes it’s important to identify and use metrics that quantify IT’s successful impact on business objectives.

“Justifications for IT investments should be closely aligned with business objectives, and IT strategies should line up with business strategies in order to maximize the return on such investments,” he says. “For CIOs, it’s important that both IT and business professionals agree on the metrics that define a successful investment and work together to jointly act and monitor for results.”

He points, as an example, to business interest in using automation to reduce low-value manual tasks so that workers can spend more time on customer-focused activities that drive growth and revenue. So CIOs here can quantify how many hours of work automation saves and the value of that.

Share the story of IT’s impact

Using metrics to quantify IT’s value is just half the equation, experts say. The other half is using them to tell IT’s story — another area that has traditionally been a struggle for tech leaders.

“The value of tech investments hasn’t been communicated properly, and that’s a big pain point for IT as well as for the business, even as there has been a shift away from viewing IT as a cost center and seeing IT instead as a value center,” Armstrong says. “IT still misses out on being seen as a strategic partner to the business because it’s not measuring properly and it’s not communicating. So there is a misalignment about what value actually means both to IT and the business.”

To be clear, CIOs don’t need a full-scale marketing campaign, or even a newsletter — although, as Vidoni attests, it can be helpful. Rather experts say it’s about CIOs sharing details on IT’s successes and putting them in business context; they should not assume that their business-unit colleagues can see for themselves how technology delivers business value.

“There’s not enough focus on storytelling in IT,” Armstrong says. “So remember, words matter; don’t be too technical. Second thing, know your audience. And third, know who’s your protagonist and what conflict they’re trying to resolve. Telling how you’ve helped them overcome that conflict is what creates the great story.”