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Measuring Your I.T. Superiority

By Paul A. Strassmann  |  Posted 2005-09-07 Print this article Print

Your information-technology operations cost less than your rivals' systems. But does the board know that? Here are some numbers to bolster your case.

During a review of the effective- ness of information-technology operations, directors sitting on corporate boards would usually like to avoid hearing about technical topics such as "architecture" or "networking strategies."

The directors—who usually have a limited amount of time to devote to an examination of technology spending—tend instead to focus on whether steadily rising technology costs actually deliver a competitive advantage to their company.

A chief information officer who wants to successfully withstand such an inquiry should seek out credible evidence to make a case. Essentially that means showing, and quantifying, how the company spends less than key rivals on information technology while simultaneously delivering superior results to shareholders.

Where to begin? Start by reviewing the financial statements of your company and those of your rivals, identifying technology spending as well as other expenditures and metrics such as employee head count.

Then, calculate key cost ratios, such as technology spending versus revenue, and key performance ratios including return on shareholder equity for your company and your rivals (see worksheet at right).

If the cost ratios are lower and performance ratios are higher than those of your competitors, you will have a better shot at getting your request for information-technology spending plans approved by the board of directors—or even possibly keeping your job for another few years.

Paul Strassman created and trademarked the Information Value-Added and Information Productivity formulas behind the Baseline 500 rankings. His career in technology, which began in 1956, includes stints as a top information-technology executive at Xerox, General Foods, Kraft, the Department of Defense and NASA.

Strassman is president of The Information Economics Press and senior advisor to Science Applications International Corp., he is also Distinguished Professor of Information Sciences at George Mason University's School of Information Technology and Engineering.

He has written numerous articles and books on information management, including Information Payoff: The Transformation of Work in the Electronic Age (1985) and The Squandered Computer (1998).
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