Eight Ways to Boost Your Return on IT

By MarkBall

The current economic environmentpresents many challenges for IT executives, since reduced budgets and increasedfinancial scrutiny make it difficult to manage existing operations and stillhave room to make investments in new technologies. To succeed, IT executivesneed to focus on maximizing their return on information technology for bothcurrent and future projects. An ROIT focus pushes the organization to make themost efficient use of its capital, by managing and driving performance metricsthat maximize financial value.The concept of ROIT issimple: A project?s financial benefits must be greater than its costs todeliver positive returns to the organization. However, calculating a project?sspecific ROIT value is a notoriously difficult exercise, since not all ITinvestments produce measurable financial benefits.Even so, this shouldn?tprevent IT executives from measuring and influencing the fundamental drivers ofROIT?cost savings and revenue enhancements?to optimize the value of their ITportfolio. Below are eight practical suggestions to enable IT executives toboost their company?s overall ROIT:

1. Analyzeyour IT spend. Savings opportunities can be identified by organizing ITspend into categories and analyzing the results. How much money is the companyspending with its largest IT vendors? Are there categories where spend can beconsolidated into fewer vendors to achieve scale economies? Are therecategories with too-few or monopolistic vendors, where competition can beintroduced to reduce costs? A thorough understanding of the company?s IT spendwill highlight areas where savings can be achieved and vendor performance canbe improved.

2. Introducevalue contribution metrics. Common IT performance metrics such as systemavailability, trouble-ticket resolution and response times are importantmeasures of operational stability, but they may not capture whether an ITproject or asset is actually delivering value. Value contribution metrics suchas cost savings, productivity gains, customer satisfaction and cycle times canbe powerful indicators of the benefits delivered to the organization. Smart ITorganizations continually revisit their performance metrics to confirm thatthey are aligned with the company?s strategic goals and enable managementdecisions.   

3.  Manage assetutilization. Periodic utilization audits of IT assets will confirm whetherthe number of units under maintenance isn?t greater than the number actuallydeployed and used. Underutilized IT assets result inincreased maintenance costs and/or untapped value. If there is a significantgap, IT executives should either find ways to increase utilization, via usertraining or management communications, or renegotiate maintenance terms withthe IT vendor and ?true-down? the number of units owned.

4. Consider?lease versus own? decisions. Often, a third party can manage IT assets andprovide additional solutions more efficiently, more economically and with higherquality than the company?s IT organization. ?Pay by the drink? business modelsalso offer additional flexibility and scalability. Cloud computing, outsourcingand other mechanisms can be leveraged to shift the costs of owning andmaintaining expensive IT assets to a third party. However, IT executives shouldweigh the strategic implications of these opportunities?including their effecton management control and business risks?against the economicimplications. 

5. Don?tforget top-line performance. For appropriate IT assets and projects, theorganization should capture metrics that influence revenue, such asimprovements in lead generation, online traffic, number of customertransactions, sales cycle times and conversion rates. Revenue-orientedmetrics will also enable IT to strengthen its relationship with the marketingand sales groups in order to jointly explore further opportunities for businessgrowth.

6.  Empoweran IT Governance Committee. An IT governance committee should be engaged toevaluate the performance of the IT portfolio against the value contributionmetrics, and to drive future investment decisions. The committee, which shouldinclude executive stakeholders from other business units, should be givensufficient authority to hold IT accountable for delivering results. Whenproperly engaged, the IT governance committee can serve as both an advisorycouncil and an important ally for IT in the quest to forge deeper relationshipswith the company?s business units.

7.  Encourageinnovation from employees and vendors. IT executives should establishcollaboration mechanisms to allow employees to share creative methods for deliveringimproved results. Vendors can also be leveraged in this regard, since they knowwhat techniques other clients are using to achieve maximum value from theirproducts and services. Strategic vendors should be invited to present new ideasto boost the company?s ROIT.

8.  Broadcast results. An IT dashboard isan excellent mechanism to monitor and broadcast IT performance. But it isimportant that is dashboard be visible outside the IT organization, to allowother business units to understand the value IT is providing. Broadcastingresults also keeps the IT organization sufficiently motivated toward continuousimprovement.

IT organizations would greatly benefit from an increasedfocus on measuring and improving return on IT. Implementing these tips willallow IT executives to gain increased visibility into the value and performanceof their IT assets and projects, so they can make sound investment andmanagement decisions.  

Mark Ball isthe managing director of Emerging Sun, a Washington, D.C.-based managementconsulting firm that offers ITstrategic services, including IT acquisition support, IT portfolio strategy,program management and technical support. He can be reached at [email protected].