Connecting the dots between IT performance and business success has posed a challenge to CIOs for decades.
Over time, IT costs have dramatically declined on a unit cost basis. At the same time, business consumption of IT has skyrocketed, resulting in a steady growth in total IT spend. Against this backdrop, boardrooms began to ask what they were getting for their investment, and why cheaper storage, computing and network costs weren’t translating directly to higher productivity and increased profits. Technology writer Nicholas Carr put CIOs further on the defensive with his 2003 argument that “IT doesn’t matter” to a business strategy.
Today, the debate has evolved to the point where few would question the strategic value of IT. Nonetheless, defining specific linkages between IT systems and business outcomes remains difficult. And now the issue increasingly affects CIOs in their wallets. “By 2020,” research firm IDC predicts, “80 percent of IT executive leadership will be compensated based on business KPIs and metrics that measure IT’s effectiveness in driving performance and growth, not IT operational measures.”
In a recent article in Future of Sourcing, my colleague Betty Cardiel discusses the challenges of connecting IT metrics and business value, and outlines a three-pronged strategy characterized by:
- Governance methodologies that define IT/business linkages and key metrics, enabling the development of value chains and a KPI dashboard
- Tools that automate data collection and analysis and enable monitoring of multiple variables and metrics over time
- A start-small approach that focuses on specific business issues and that can subsequently be scaled across the enterprise
This approach is particularly useful to address the relatively new factor of data overload. Thanks to increasingly sophisticated tools and capabilities, executives have overwhelmingly vast volumes of data on IT performance. While a potential boon, this can result in a needle in a haystack situation regarding where to look for insight, as well as create uncertainty around data integrity and trusted sources of truth. The combination of scalable methodology, automation to process data and a focused approach is ideally suited to tackle the data challenge.
Another key is a change in mindset. CIOs need to move beyond their traditional insular focus on IT and operational issues and extend their purview to business problems. Not surprisingly, this requires CIOs to gain deeper knowledge of the business; specifically, CIOs need to develop areas of specialization that will enable them to provide meaningful insights to business leaders.
Finally, effective communication across the business is imperative. While IT’s impact on the business is a C-level strategic concern, the actual linkages typically occur at a deeply granular level of supply chains and production processes. That means communication needs to occur at the right level to ensure that IT/business linkages are identified, acted upon and monitored, and then subsequently reported up the ladder of authority.
