Defining Value

By Allen Bernard

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Defining the value IT brings to an organization is never easy. But it's up to the CIO to make sure the enablement IT brings to its constituency is heard loud and clear in the board room.

Now, saying a thing and doing it are, of course, two completely different things. But without a concerted effort to show the business, in terms it understands — productivity gains, top-line growth, bottom-line cost savings, mobile employment empowerment, customer retention, et. al. — what your department is doing to further the business' goals, the chances of having any say down the road about the future of your department begin to slim.

"The IT leadership, to demonstrate value, they have to be business people and understand the business and be able to be fluent in discussing how the company makes money and what its business challenges are," said John Hill, CIO of Siemens Business Services. "The value, at the end of the day, has to translate to revenue or cost. The ultimate value has to be described in common-sense business terms."

This does not mean it's all about metrics like ROI and TCO, but that's where the definition begins to take shape. Your other c-level counterparts (hopefully) understand that not everything can be broken down into dollars and cents. There are "soft" benefits that bring considerable value to an organization such as brand recognition, said Mary Wood, a former CFO for DHL Express, Alamo Rental Car and National Rental Car and now managing partner, south Florida for Tatum, LLC.

But without the metrics to show what was going on before a major project was implemented, for example, there is no way to quantify what can be very qualitative by nature, such as employee happiness (the logic being that happy employees are productive employees).

"Unhappy, poorly trained employees can shut the whole thing down and do very often; they don't use it or they use it wrong," said Josh Greenbaum, principal and founder of Enterprise Applications Consulting, of any given IT initiative that involves how employees do their jobs.

So, in this instance, maybe you could show how a process was being handled before the new install of System X — how much time it was taking to do something, where the bottlenecks occurred, how exasperated (if you can put a number on that) employees got with the old system — versus how many employees actual adopt and use the new system and how well it solved problems the old processes presented.

To do this, at least with new initiatives, said Bill Huber, regional practice leader for Tatum, LLC's southeast region and a former CIO, it's best to identify early those metrics that will, if the project is successful, show that success in terms of business value.

Again, easier said than done. Huber recently asked a group of execs at a company he was working with to define success and the value a given IT project brought to the company: "They struggled with that question.

"They started out by trying to use quantitative measures like ROI and time scheduling and things like that … Where we ended up, kind of at the end of this session, was to talk about identifying much earlier on in the scoping of these projects what success really meant."

If, on the other hand, you are being asked to show what IT does for the company in general, your chances of being considered an asset versus just a cost center, go up considerably, said Tatum's Wood.

"If (IT) get themselves to the point where they're sitting in a room having to justify their existence, chances are they have not been a good business partners."

And that's what it comes down to: being a business partner. You can have all the fancy new technology you want, but if the rest of the company doesn't perceive it as a benefit to the business, it will all go for naught.

Of course, there some things you have to do from a technology perspective to stay competitive and that may cost you, but you know they need to be done and if, as Wood points out, you are doing your job, the rest of the executive team will see the light as well.

Taking this logic a step further, there are some things that should probably be talked about only with your staff. Things like service-orientated architectures (SOA). Try to explain that in business terms and watch as the eyes glaze over.

You know that reusing critical systems to enable a more flexible infrastructure is a business positive, but SOA is a pretty technical subject. So just drop the term and simply point out how IT is better enabling X and streamlining Y.

The CEO and board don't need to know how, they just need to know that IT is making the business better. And that, at the end of the day, is what IT is supposed to do.

"It is imperative to try to translate those things into numbers the rest of the enterprise can understand," said Greenbaum. "One of the problems IT always suffers from is it is a black box to a lot of people. If you don't explain what's going on in the black box, people aren't going to be very impressed with what you improve."