Since our book was published, I am seeing the phrase “Business Value of Technology/IT” more and more.  I guess it’s a sort of affirmation or maybe even a compliment. I saw the above title on a short article by Faisal Hoque in the November issue of Baseline magazine.  Faisal asserts that “using the right metrics to assess the business value derived from technology is critical in demonstrating the effectiveness of business technology investments.”  I agree completely.  So what are they?  Unfortunately, while Faisal gives us some excellent pointer for a process to find the metrics, there are no examples of what the metrics might be.  Check it out for yourself at the link below:

Assessing-the-Business-Value-of-Technology

I was recently referred to a vlog (yes, that’s a video blog!) featuring an interview with Howard Rubin on Eric Chabrow’s CIO Insight Blog “Parallax View.”  In this very short interview, Howard perfectly captures the issues that drove us to write our book, “The Business Value of IT.”  Kudos to Howard and Eric!

You can see the interview yourself at:

vlog_are_cios_degrading_their_jobs.html

I just realized that I haven’t posted a link to our book yet …

If you have read it, I would welcome some feedback.  If you haven’t read it, please buy it and let me have your feedback or tell me why you won’t be buying it.

ref=sr_1_40?ie=UTF8&s=books&qid=1225243195&sr=8-40

Thanks

 With thanks again to the folks at InformationWeek for their excellent survey results (see reference at the bottom of this post), I was curious when I looked at their tables to see if the split between legacy and new project spending in IT budgets was consistent or different by industry sector.  As you can see from the chart, it seems to be that there is more consistency than variation particularly in the context of the second chart that shows much greater variation in percentage of annual revenue devoted to It in the different industry sectors.  A current rule of thumb for legacy spending seems to be about 65% or 60% which is much healthier than the figure of 80% than was doing the rounds a few years ago.  Of course, if we are facing a down turn then spending on new projects, which tends to be more discretionary, will drop while spending on legacy, which tends to be about preserving the status quo or keeping the lights, is less flexible and more likely to stay flat than drop. We may see some retrenchment in these percentages next year.

This chart shows that the Banking & Financial sector continues to spend twice as high a percentage of revenue on IT as its nearest rival sectors and four times as high a percentage as some.  It will be interesting to see if this changes next year as the Banking & Finance sector deals with the self-inflicted financial constraints of the credit squeeze and the demands for increased regulation (which will presumably require more reporting and more IT).

The above charts were created from data provided in the InformationWeek 500 published on September 15, 2008.  (reprints of that article which includes the data but not the derived charts are available at www.magprints.com/informationweek500

I’m not going to go into the details of this Standish report because I think that, if you are reading this blog, you will probably want to geta copy of the report at:

http://www1.standishgroup.com/newsroom/it_value.php

To whet your appetite, the ten drivers that Standish identify (along with 3 sub-drivers for each category) are:

1. Lowering the Infrastructure Cost
2. Increasing Application Features
3. Reducing the Cost of Downtime
4. Maintaining Suitable Risk
5. Commoditization
6. Higher Readiness
7. Project Management Leadership
8. SOA
9. Service Delivery
10. Vendor Consolidation

Do you agree with these? Have they missed something? 

My own perspective is that there is a lot that is right with the Standish top ten, particular when they are talking about cost drivers. 

While I agree that “Increasing Application Features” is a big driver of value, the Standish report misses the important point that Application changes should not be about features but about business benefits embodied in business cases (if you don’t think there is a difference between features and benefits talk to a marketing person).  While innovation can be realized through any of the top 10, it will be through enhancing the Applications that innovation impacts business processes, services and products. 

The report gives a good treatment of “Higher Readiness”.  I would have exteneded it to include responsiveness.  One of the big complaints that i hear about IT from business people is that IT operates on its own timetable (or a different clock frequency if you prefer) and is unable to respond quickly to business needs.  Of course, there are always good reasons for not being distracted by continual changes - its very inefficient and drives up costs.  However, there are no excuses for not being tightly aligned with the businesses current needs.  It was partly this separation of clock frequencies that led to the sprint-driven agile methodology which focuses on reprirotizing at the end of each sprint.

One final comment on the Standish report. They include a defintion of “Value” which I will not repeat here other than to mention their suggestion that one way to think of the value of IT is as the difference between the cost of the IT Service and the cost of providing the service manually.   This really struck me as strange.  My reactions, in quick succession, were: “That seems reasonable,”  “Surely, value is in the eye of the beholder?” and “Hang on, haven’t we moved way beyond comparing IT solutions to manual solutions?”  What do you think?

IT spend as % of revenue is a frustrating metric because it places IT firmly in the sphere of costs that cannot be avoided and must be managed rather than an investment that should yield beneficial value.  Being above or below the average % revenue line is no great indicator of success other than the feeling that, as a CIO, you are doing are doing better or worse than your peers in the eyes of your boss (especially if your boss is the CFO).  Looking at the chart below (if you click on it you will get a version that’s easier to read), you can see that, for the mash of all industries, the percentage has stayed remarkably stable between 3% and 4% over the past eight years.  What does this tell us?  Two things:

1. I think its a number that business and IT need to be aware of (about 3.5% - more on the industry specific numbers soon)

2. Because this variable has been held steady, we can look at the other variables in a different light.  For example, have all the contributions to better performance over the past eight years (SOA, web services, ITIL, CMMI) been a waste of time or are the improvements perfectly cancelled out by the cost of the extra work we are able to do now?  What do you think?

The above chart was created from data provided in the InformationWeek 500 published on September 15, 2008.  (reprints of that article which includes the data but not the chart are available at www.magprints.com/informationweek500

Writing in the September 15, 2008 edition of Government Executive, Carolyn Duffy Marsan proposed seven best bets in IT for the new administration (of whatever party).  The seven were:

1. Cybersecurity
2. Performance Measurement
3. E-Government
4. Lines of Business
5. Federal Enterprise Architecture
6. IPv6
7. Green Data Centers

All good stuff!  But, naturally, the one that I am going to focus on is #2 Performance Management.  Not just because the David Consulting Group can help but because, frankly, it is easy to do and we do not see enough evidence of it yet in government IT projects.

To get some insight into why these seven were chosen, you can read the original article at http://www.govexec.com/story_page.cfm?filepath=/features/0908-15/0908-15s3.htm

The September 22, 2008 issue of Federal Computer Week contained a couple of articles about a fairly new concept in the US Government - the Chief Management Officer or CMO.  The idea is to create a position in agencies to elevate the level of attention paid to management issues, integrate various transformational efforts and institutionalize accountability.  Is it just me or is this the ultimate symptom of total management failure?

Fot the editorial see, http://www.fcw.com/print/22_31/comment/153791-1.html

For more information on the CMO concept, see Jonathan Breul’s article, http://www.fcw.com/print/22_31/comment/153814-1.html

If you work in financial services, it may be that you already have some idea what your future will be like but, if you are like me, you may be sitting there wondering how all of this is going to impact the more general IT world.  In their 9/22 edition (seems like a long time ago at the moment), Information Week reported that Forrester Research has revised its predictions for IT spending for the rest of 2008 and 2009.  Interestingly, Forrester has raised its 2008 estimates for US IT spending up from 3.4% to 5.4 % higher than 2007 spending.  The 2009 forecast was 9.4% over 2008 but is now 6.1%.  Taken over the two years, the new forecast are definitely lower but not by much.  In the same article, IW reports that Gartner is sticking with its mid-August 2008 forecast of 4.5% growth in global IT spending.

All of this information and more was in the “Newsfilter” section (by Chris Murphy and Marianne Kolbasuk McGee) of the paper version of IW but I have been unable to find it online to provide you with a link.  Sorry.  If anyone can find the link, please add it in a comment.  Thanks.

I was reading Federal Computer Week (from a month ago - I catch up my reading when I can) when I came across a short article by Emory Miller.  Apparently, the US governments Office of Management & Budget (OMB) have reported that, “413 federal projects valued at $25.2 billion in 2008 alone need better planning, management and oversight.”  Two things struck me:

1. Having worked on small government contracts, the last thing that they need is more bureaucracy. Hence, I suspect some of these projects are so huge that even the participants dont know how to plan and manage them.  Perhaps the problem is about getting the projects to be the right size for the planning, management and oversight that the government employees already have in place?

2. I wonder how much potentially wasted  money commercial organizations would find in their IT shops if they had an equivalent of the OMB?  How would they even start such an analysis?  I suggest that a combination of portfolio management and gap analysis by an independent organization against best practices in IT governance, IT operations and software development would be a good place to start.

Miller’s article can be found at the following link:

http://www.fcw.com/print/22_29/comment/153682-1.html