The changing face of Value in IT Services
How valuable is the rate card now-a-days? Can you tell the quality of a meal by knowing the cost of each ingredient?
I've recently seen a lot of effort being invested in rate cards but at the same time, I'm engaged in many discussions with CXOs about how we can put more "skin in the game", achieve better business alignment and deliver value.
Value is a simple concept, as the formula above shows, and it consists of two components - quality and cost. Quality is the intangible component and can be debated but cost is a function of rate by day (for people based services). This is not going to be a lesson in mathematics but a question as to whether a focus on the day rate is really delivering value and, more importantly, how might we measure value for IT services.
As an industry, IT is often given a hard time in respect of the delivery of value. The trend for ERP didn't really deliver business benefits, major IT overspends on projects, public IT disasters like those that have happened again today are all examples of IT failing to deliver value. But, did anyone consider defining value prior to these issues arising, I suspect not! Did they look at the cost and then create a justification around that, not the expected outcomes?
But as Robert Zimmerman said "The Times they are are A-Changing"......
Commoditisation of IT in certain areas has allowed procurement to change the cost line to be driven by something more aligned with the concept of value leading to a situation where quality gets driven up. Applying this concept to Infrastructure and Software has simplified the procurement of these considerably and led to the markets for IaaS and SaaS respectively. This is been made easier because the unit of purchase was more straight forward and the supplier was prepared to hide the complexity of getting from the old way to the new way. The result, customer is happy and there is better alignment to value.
Now that we've started on this journey, we can't stop. We need to extend the concept to the delivery of people based services such as Applications Development and Management. When I speak to CIOs they tell me that their customers, the business, want IT services to be more aligned to business outcomes with value being seen as delivering on those business outcomes. They also want to minimise risk of value delivery. Oh! And they want it done faster.
Agile & DevOps are great ways to deliver things faster and many of our customers are exploiting these methods to deliver faster but it's still essential to understand what value means. There is still a propensity, when it comes down to it, to take a traditional cost based view even though that is often disconnected from the actual value itself.
But with times (a-)changing we can now look at value and outcomes as ways to measure the success of IT Services, we often measure the success of applications services based on the performance of the business process. But as with the design of an IT system it takes time, discussion and the engagement of all stakeholders to come up with a commercial solution but doing it well is rewarding because the results achieve all parties expectations.
So does the lowest rate cards deliver the best value? Only if it is also able to deliver quality. It is the clear definition of value at the start where IT has failed in the past, it's now possible to address this but we need all stakeholders engaged.
So, we can tell you the cost of our ingredients but wouldn't you rather know about how delicious and satisfying our IT services now are?