As the CFO or CIO how are you measuring the performance of your IT function in an ever-changing land
Gone are the days when IT was seen as a back-office function of the business. The evolution in technology over the last twenty years or so has meant that IT as a function has not only become a critical part of the day to day operations, but also a key stakeholder when it comes to shaping Business Strategy. From a numbers perspective, according to Gartner Research, IT spending across Europe is expected to reach €1.17 trillion this year*.
This new role means as Finance, we need to constantly challenge ourselves in terms of how we assess the overall performance of IT in relation to that of the Business. Generic spreadsheet-driven financial metrics such as actuals vs. budgets/forecasts, whilst still relevant, only provides limited insight. Its purpose mainly serves a short-term driven agenda, leaving little room if any, to assess the medium to long-term areas around tactical and strategic functional performance.
Enter IT Strategic Performance Measurement & Management
A strategic performance perspective facilitates the measurement of both financial and non-financial areas. How we assess the performance of the IT function should mirror how we evaluate Business performance - i.e. a balanced perspective. This approach emphasizes the need to cover all the bases in an unbiased, objective manner whilst addressing the perception of IT being a black box.
In looking at the IT Function one could come up with a list of key metrics worth measuring performance on. Whilst this is not meant to be an exhaustive list, examples of key metric categories could be Customer Satisfaction (both internal and external), Finance, Innovation, Delivery and Business Value Added.
Expanding on these themes, one is then able to draw on the metrics that will provide a balanced perspective that best aligns to the Business Strategy, Goals and Objectives.
As an illustration, let's take a look at a few categories referenced earlier:
1. 'Delivery' - examples of a balanced perspective could be:
Percentage of projects & programmes being delivered on time, within agreed scope and budget,
ROI percentage for the change portfolio,
Delivery category performance when compared to competitors or benchmarking data,
Customer satisfaction across Delivery portfolio,
2. 'Business Value Added' - examples of a balanced perspective could be:
Percentage of project spend alignment with business priorities,
Contribution to incremental revenue through IT Functional delivery,
Contribution to business efficiencies and cost reductions through IT Functional delivery,
Driving IT standardisation across Business
Is Technology Business Management the answer?
If a spreadsheet-driven approach best describes your environment, then recommend considering Technology Business Management (TBM) and the framework it provides in addressing these challenges.
Having a real-time TBM platform means you can start asking questions on the cost and performance of IT rather than the validity of the data. When you can see data from so many different perspectives, but always set against a business context it is possible to truly manage the business of IT whilst providing a financial line of sight into the enterprise.
The leading provider in this field, Apptio with its SaaS applications, based on a recent Forrester study, Apptio believes that European organisations can identify approximately five percent of total IT spend to be saved or reallocated towards innovative new projects. If implemented across Europe, Apptio has the potential to uncover more than €58 billion in savings for IT leaders. These savings are based on findings derived from a recent Forrester study on the total economic impact of the Technology Business Management (TBM) methodology employed by Apptio. Additionally, McKinsey & Co.’s “A Business-Backed Approach to Technology Consumption” reports that basic transparency can help reduce IT run costs by 10-25% with up to 5-10% of potential savings in the first year.
So, the question really is, what's stopping you from embracing TBM?