IT Metrics Continued – CIO to CIO

In my previous post, IT Metrics Introduction – CIO to CIO, I discuss that CIOs need to focus more on presenting business relevant metrics. I discuss that CIOs should look at presenting 3 metrics that can show the value of IT.

  • IT Investment Value – Present the value of IT investments by looking at the cumulative return of the entire portfolio

This metric is generated by sorting all projects in the portfolio by their net present value (NPV). If you graph this out with Total $ value on one axis and number of projects on the other axis and each project value plotted you can graphically see where projects stand.

Don Lewis recommended that on portfolio value measurements, success metrics for individual projects should be established prior to implementation and then measured and reported for some period after go-live. While this is a bit more micro level, it can feed into the metric of return on portfolio. (Thanks Don. Good thought).

  • IT Spend – New investments versus operational spending

IT departments begin devoting more and more of its budgets to maintenance. By looking at the IT spend ratio on new investment versus operational spending you can begin to get a sense of where budgets are being devoted. According to Forrester Research, the average IT organization spends 70% to 80% of its budget on maintaining the status quo versus only 20% to 30% on new initiatives. Best practices companies have taken this ratio to 60/40, and some are actually driving toward 50/50. Measuring and reporting this ratio can be a key indicator of both the efficiency of IT as well as IT value creation this ratio can be a key indicator of both the efficiency of IT as well as IT value creation.

  • Service Availability – IT performance compared against service-level agreements

I am not a fan of surveys. I think they are a snapshot in a point in time and are difficult to get proper feedback. IT performance compared against service-level agreements (SLAs) are a much better metric.

When SLAs are divided by mission critical applications or business services, they can be valuable indicators. With SLAs you can quantify and qualify the business impact of failing

IT Metrics Introduction – CIO to CIO

One question that is always at the forefront on the minds of CIOs is what metrics to present to the business that is relevant. IT executives, generally have a tendency to present a vast array of data-most of which are irrelevant to business executives. The secret is presenting only a few key metrics.

Most IT metrics tend to be IT-centric and operationally focused on underlying technologies, such as WAN availability or server downtime. It is difficult for business execs to understand these measures and provide little insight into the value that IT delivers. As a result, the business typically focuses on the one metric that they understand — the cost of IT and how to reduce it — and this leads to a continuous cycle of cost reductions and the continuous statement that IT is only a cost center.

There really are a few metrics that make sense to present:

1. IT Investment Value – Present the value of IT investments by looking at the cumulative return of the entire portfolio

2. IT Spend – New investments versus operational spending

3. Service Availability – IT performance compared against service-level agreements