Measuring Your I.T. Superiority

By Paul A. Strassmann  |  Posted 2005-09-07

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.