IT departments failing to measure their strategic contribution

Jul 24 2006 by Brian Amble Print This Article

IT departments are still failing to measure the strategic contribution that IT makes to a business even though this omission is hindering organisational success, preventing budgets being signed off and stopping IT directors rising to the board.

According to an independent survey of 100 IT directors commissioned by software provider Touchpaper, one of the main reasons for this is the deep seated, historical perception that the IT department is a cost rather than a business asset and is run by people who are more interested in technology than delivering business value.

The survey found that only four out of 10 UK enterprises formally measure how IT is contributing to strategic business level goals or track key performance indicators for IT such as cost management, revenue growth or service levels.

This is despite three quarters of IT directors agreeing that difficulties in demonstrating IT's contribution to business success is one of the major reasons for IT budgets not being approved and almost six out of 10 citing it as a key reason for IT failing to achieve a place on company boards.

"The role of IT is rapidly changing, particularly as organisations become more complex," said Touchpaper CEO, Graham Ridgway.

"Information technology should be seen not just as a cost centre, supplying infrastructure, but as an enabler of an organisation's overall business objectives. But our research shows that IT departments are still struggling to be seen this way - and the lack of a strategic approach to measuring their contribution is part of the problem."

Company culture and preconceptions about the role of IT emerged a major issue, with cultural resistance the overwhelming factor preventing IT departments measuring business level KPI. Other factors include a lack of time, lack of training and a lack of technology or tools.

"IT should strive to assume a more strategic role within the business and convince the doubters by demonstrating the value they bring," Ridgway continued.

"IT departments need to be more positive about how they can contribute to business success."

Ridgway added that there is growing evidence to back this view, pointing to research from MIT which found that top-performing enterprises succeeded by implementing effective IT governance and putting a management framework in place to support their strategies. As a result, MIT suggested, firms with above-average IT governance had more than 20 percent higher profits than firms with poor governance.

When IT directors were asked about measuring business level KPIs for IT within a variety of commercial areas, more than eight out of 10 said that it was possible to measure service levels, almost three-quarters said that cost management was measurable and more than six out of 10 said the same for risk management.

Yet fewer than half said that IT's impact on revenue growth could be measured and a mere one 10 believed it was possible to measure its impact on value (such as. shareholder value or brand name).

Worryingly, meanwhile, only a quarter of those questioned said they used any automated systems to track and monitor IT performance, with most continuing to rely on manual systems.

"KPIs and the systems that support them can help an organisation make better long term investment decisions, and can also support daily operating decisions and the allocation of resources against organisational priorities," Graham Ridgeway concluded.

"For instance, by building a KPI weighting function into operational systems, according to the level of importance or 'value' to the business, information can be presented to individuals and departments in accordance with their roles and responsibilities, ensuring that they take the most appropriate action at the right time, to meet the organisation's business objectives."