Connecting IT to Business Value

Hi everyone,

Today we are focusing on an urgently important topic which is also a differentiator for shiftavenue, as IT should and needs to drive value for the business.

IT dilemma

Unfortunately, IT is often seen as a cost center - a commodity like electricity. It doesn′t matter where you get the electricity from and how much it costs as long there is electricity and it is cheap.

One reason is that the key KPI for the CIOs (and sometimes CTOs) is the sole focus on the IT budget, often due to the reporting line to a CFO or COO or historically grown.

In parallel, Digital Transformations tend to have an ROI in the long future, not rarely in 3-5 years from its starting point. But IT management has much shorter feedback cycles, and management is typically very reluctant to these risks as they don′t know if they will be working for the company anymore when the ROI is amortizing.

And the last typical reason, or very often the resulting symptom, is the outsourcing initiatives by the customers trying to save money and treating IT as a commodity without even considering value. Typically, you will see managed services focused on SLAs / availability and rarely on qualitative measures. But almost never will they be measured on business value due to innovation.

And this is a pity because it is a missed opportunity!

The Value of Digital Transformation

This brings us to Digital Transformation, where we want to disruptively change processes, technologies, and people for an improved outcome, with IT playing a key role. And this is a significant paradox, as Digital Transformation only focuses on resulting business value, and the transformation will almost always require a dedicated investment to reach their goals.

So, what are the targeted outcomes?

1. As you can see in the picture, the first and most basic one is to operate better, which often means cheaper, more secure, and of higher quality.
2. The second area targets the current business and often searches for the potential to improve by focusing on the supply chain or value for the customers.
3. The third and already more challenging one is to focus on a completely new business, e.g., from aggregated data's input and insights.
4. And the last one - this is the one which is typically ignored - is the focus on the own workforce, their efficiency, and the approach for New Work also to be an attractive employer for the people.

But to reach these goals, IT investments are required, and many IT managers will need help negotiating these, as they are personally measured on their IT budget, limiting the right investments.

Measuring Business Value

The solution is to measure the business value resulting from the IT investments. Therefore, we created the following seven areas for you to understand what "value" actually means.

• Revenue - This is the impact on revenue, which will likely come over the next years due to the changes. These typically require some revenue stream explanation to make them more tangible.
• Risk - This is the positive reduced risk due to improved technological implementations and modern processes. e.g., a good Business Continuity Management should be in place.
• Customer Satisfaction - This is customer satisfaction due to the changes, e.g., new or better products, which can also lead to more revenue. We recommend measuring satisfaction dedicatedly, and as a result, it is one of the seven areas.
• Employee Satisfaction - Very often forgotten - Employee satisfaction can lead to better efficiencies, better talents, fewer sickness times, and a lower attrition rate. This is also a very strong recommendation to measure it dedicatedly for being able to react proactively.
• Product / Solution - New or improved products can help to increase revenue, improve the brand, or make yourself stand out from the competition. It is important to have KPIs for your product.
• Brand / Reputation - This is a long-term value you should treat like your baby. It will impact everything, though it might be harder to measure, but it is possible. A good brand is necessary for sustainable growth.
• Operational Costs - This is a reduction of operational costs, e.g., you need to invest in operations to save operational costs in the long-term by implementing automation, infrastructure as code, or policies. You are measuring them today, but you should also consider the impact of IT Maturity and automation investments that will lead to better operations. Also, we recommend making Tech Debt transparent, as these costs will definitely hit you in the future.

As you can see, there are ways to measure it. We at shiftavenue also have a full list of KPIs for each area and a plan to implement IT as a Business Enabler. Don′t hesitate to reach out.

Final Words

As a result, we hope you understand the possibility and, more importantly, the reason and need to start measuring IT investments by Business Value and not just based on IT costs. There are KPIs to help you start this approach, and it will also help you to understand if your Digital Transformation is heading in the right direction.

Best regards,

David das Neves