Measuring the value of IT

Judging the success of a business’ technology used to be easy. If the email was coming in and going out, and all staff were able to work in their Lotus 1-2-3 spreadsheets, the computer technicians were doing their job and all was rosy. Of course, we weren’t really measuring server uptime, the effectiveness of filtering of spam email, or whether we really needed to click through six screens before we could get to our inventory screen. So perhaps measuring IT effectiveness wasn’t so much easy as it was immature.

Come 2018 and evaluating IT effectiveness has gone well beyond just whether the lights are still on. Reliability is still critical – more so than ever, in a world where much of our business information resides only in server databases and customers expect service within thirty seconds rather than thirty days. But when every business in the marketplace is using similar software tools and network configurations, mere operability is no longer sufficient to justify the never-ending stream of funds that go into IT services.

Modern IT has a multitude of functions. Listing just a few of the most obvious would include:

• Staff onboarding and offboarding processes;
• Provision of email and file sharing and database services;
• Internal network maintenance and performance monitoring
• External networking, WAN and website management;
• Identifying, implementing, training and supporting internal software packages;
• Security of IT and IP from both external compromise and internal threats;
• Backup and recoverability of business information, services, software and hardware;
• Management, optimisation, training and upgrade of ERP tools and fundamental business operation; and
• Special projects – the development of new tools, processes and revenue streams.

All of those functions have costs, and they all have benefits, but stopping at asking whether the business is still operating is too low a benchmark. In the modern business environment, every element of a business needs to justify its costs. From human resources to physical infrastructure, every employee and every branch office must return value to the business. IT should not be any different. So the question should not be “Is everything working?” The question that should be asked is “What value does IT bring to the business?”

Answering this question requires us to classify IT in terms of the outcomes it should be delivering. In general terms there are six key deliverables from business IT:

• Reliability – Keeping the lights on. It resources need to be available when they’re needed, and without fail.
• Recoverability – how quickly an outage is addressed / recovered. Even the most reliable IT system is subject to failures, whether they be hardware failures, human error or malicious damage. Inevitably, things will go wrong. The IT function can be measured on how quickly services can be returned to appropriate levels.
• Cost effectiveness – managing costs. In IT as in all other aspects of the business, cost is the third corner of the Speed-Quality-Cost triangle.

To these three factors of every-day IT we can add three more:

• Profit capability – can IT contribute to competitive advantage, be directly monetised, or solve business needs? This is the difference between, for instance, an employee using spreadsheets to process a purchase, and the customer buying a product through an online storefront.
• Innovation Capability: how does IT support the development of new profit-generating approaches? Rather than using technology to perform the steps in your current workflow, can technology be used to fulfil the customer’s needs in a completely new way?
• Talent/personnel: Are IT personnel capable? Are staff fully utilised? Is staff turnover too high?

Each of these deliverables can be framed in a way that is measurable, and that means we can put KPIs around them.

Developing KPIs for business technology

Speed, quality and cost are the important measures, but optimising one normally comes at the expense of the others. Compromises must always be made, and context will dictate whether speed, cost or quality is the primary requirement.
To the three core metrics can be added a fourth: customer satisfaction. A business’s information technology function functions as a business unit, and the clients are your own employees. Even if the IT function is entirely reliable and well within costs, poor employee satisfaction can still impact the effectiveness of IT and the business as a whole.

Costs

IT costs include the costs of labour and personnel; subscription costs for software, online services and information resources; one-off costs for software licenses; and hardware costs. The business should establish an IT budget baseline and measure performance on an ongoing basis.

Speed

Speed can be measured in terms of how quickly issues are identified and addressed. In the case of special projects and development functions, speed can measure how quickly requests and projects are delivered.

A business can set SLAs for response and recovery to outages. You don’t want to ever put these measurements to the test, but you can perform test runs to estimate required times without interrupting business operations for real. In the case of special or development projects, the KPIs can be set for the time between scoping meeting / signoff and delivery / go-live of the finished product.

Quality

Quality is measured in terms of how well software and services meet business needs, and measures both fit-for-purpose and reliability. Software that never breaks but is difficult or unpleasant to use might still score poorly in terms of quality.

We can attempt to measure the effectiveness of any specific software tool or ERP system by listing the primary functions an application performs. Then, if any of these functions are unavailable, the application is considered ‘down’ even if most of the application is usable.

Whatever the approach taken, it’s important to be specific in what is being measured. Both IT departments and business management get frustrated when network issues are simply defined as “we are experiencing slowdowns.” One technique to solve this problem is to document workflow steps or screen transitions and define target speeds for rendering each screen. This allows actual performance to be compared to this goal. The percentage of time the goal is hit provides a good indicator of the customer service level (CSL).

Customer satisfaction

How successful is IT from the perspective of the end customer? Measuring customer satisfaction can be done informally through anecdote, but as with all measurements the more specific your measurement methodology is, the more actionable and reliable the outcomes will be. Some companies have gone so far as to implement an internal IT Customer satisfaction surveys for staff.