When thinking about IT costs, we usually consider questions such as:
- How much does it cost my IT department?
- Do I really need it?
- Do I really need an “on premises” IT infrastructure?
- Do I really need to constantly improve and modernize my infrastructure?
- Which people for what roles? Are not machines enough?
Before investing time and effort trying to understand the impact of IT on costs, it is important to understand that IT is a means, not an end. IT supports our business but as part of our business itself, not simply as an external and resources-consuming entity. The value and cost of IT should be considered in this light.
Once understood and endorsed from a core business perspective, where IT is deployed to meet business objectives, we can start measuring its performance.
The most meaningful indicators of IT performance include:
- Customer satisfaction, both internal and external: how much and how fast is my business able to adapt to customer’s needs? Capability of effective and efficient adaptation is important in order to be ready to satisfy market expectations. Metrics may be evaluated against timeliness, rate of innovation, quality, compliance with budget estimations, strategy and business alignment, quality of planning, and collaboration.
- Cost/Revenue: cost in this ratio is in not only IT cost but the total cost, so that it may properly reflect all the variables involved in the business process (following the logic that IT is a part of the business and not just an external entity). In fact, considering only the IT cost may be misleading in such a way that a feasible strategy could be to increase IT cost when revenue is low.
- Infrastructure choice: today technology allows us to get what we need when we need it, so it is important to analyze first what are the true needs of our business and then make the most appropriate choice. Metrics may be evaluated on the rate of utilization of the hardware and software that implement the infrastructure.
- Employee satisfaction: better tools are a good starting point, but we must not forget people. The right combination of the two creates the condition for a productive environment, potentially able to deliver with quality, within budget, and in time. So the right people in the right roles increases satisfaction and reduces stress and, consequently, staff turnover, which in turn leads to loss of trustable people and, not less important, institutional knowledge. Metrics may be evaluated in terms of performance that is the ability to comply with deadlines and quality with respect to task complexity.
A final note is about the quantity of valuable information an organization has to support the creation of new metrics or to improve existing ones. Organizations typically have a huge amount of information that is usually ignored, but that could be a source of rich insight when measuring business performance. Indexing is a way to classify information (e.g., text documents, pictures, videos, etc.), through the application of metadata, which makes it easier to search both structured and unstructured information. Applying appropriate technology is a useful exercise that facilitates access to data and information otherwise not visible, and can lead to a deeper and better understanding of various aspects of an organization’s ecosystem. However, this intelligence activity should be seen as a business process so it is integrated as an active part of the whole, thereby helping us better understand and manage our organizations.
For more information on performance and financial management please see our dedicated resources tab on the Global Knowledge Gateway.