10 Truths for Measuring the Business Value of IT

Questions about the business value of IT often come from senior business executives outside the IT organizations. Therefore, it’s crucial for IT leaders to influence those individuals who are tasked with distributing scarce resources across the organization, said Michael Smith, vice president and distinguished analyst at Gartner, during Gartner Symposium/ITxpo in Barcelona.

These 10 truths will help you position your funding requests in terms the business will understand and increase the likelihood of funding success.

#1. The IT Organization - In measuring the business value of IT, IT refers to the organization within the enterprise, not the technology. In other words, funding isn’t just for acquisition, but also for securing, integrating and providing reliable services from IT.

#2 Funding - A desire to optimize IT funding levels drives the need to measure the business value of IT.

#3 Money – Money is the unit of measure for value. IT people often talk about other attributes for value, but it all needs to be translated into a way the approving authority can compare to other sources requesting funding. Hint: Don’t use text to describe the value of money, or the approving authority may discount your amount when translating it to a monetized benefit.

#4 Transaction –You cannot measure the business value of IT without a transaction. Something must be delivered and consumed in order to measure the value of IT.

#5 Services - You cannot measure the business value of IT until you have explicitly defined what the IT organization is delivering (IT services) in a way that the consumer completely understands

#6. Consumer – The consumer determines the value of internal IT services by agreeing to pay for them. The approving authority for the IT budget is the “consumer” that will determine the business value of IT.

#7. Operate & Change - All IT funding requirements can be grouped into two categories: Operate and Change. You measure the business value of these two categories differently.

#8. Operate: Cost of Services - For the Operate portion of the IT budget (average 66% of total spending), value is measured by comparing the cost of your IT services to the next best alternative.

#9. Change: ROI – For the Change portion of the IT budget (averaging 35% of total spending), all benefits must be quantified, so that the ROI can be measured.

#10. Enduring - All these truths are enduring and are not influenced by changes in technology or processes.