IT Return

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The claim that information technology's benefits are real but not measurable is faint and, in this economic climate, dangerous praise. Luckily, it's also no longer the case: Corporations, analysts and academics are relying on tangible, new IT metrics to

IT Return

Metric: Percentage of Revenue-Related IT Projects
Definition: The percentage of IT projects, begun and completed within the past five years, that were critical components of new products or services that are producing revenue. For example, the IT project that contributed to the creation of a Web storefront that generates sales.
Example: # of revenue-related IT projects x 100
# IT projects

Significance: How IT has contributed to the business' financial success.

Metric: Payoff of IT Dollars
Definition: The ratio of dollars spent on the IT projects that were critical components of new, revenue-producing products or services, to the revenue dollars received to date from those products/services.
Example: $ spent on revenue-related IT projects
$ generated by parent projects

Significance: The payoff of discretionary IT funds. Tracks the efficient use of IT dollars; a lower ratio is better

Metric: Knowledge Management Payoff

A. Employee Suggestion Payoff
Definition: The payoff of IT's support of employee suggestions. Divide the annual revenue or cost savings generated by employee suggestions by the number of employee suggestions; divide this number by the annual information technology costs used to support the employee suggestion system (which might be e-mail, an intranet site, the telephone, a database and so forth).
Example: $ saved or created by employee suggestions
                        # of employees                      
$ costs of IT to support employee-suggestion system

B. Patent Payoff Definition: The payoff of IT's support of company innovation. Determine revenue of products or services that are protected by patents; divide by the number of patents involved. Divide again by the annual cost of the IT employed to serve the company's research and development efforts.
Example: $ generated by patented products and services
                        # patents                      
$ costs of IT to support R&D department

Significance: The return on IT's assistance in the creating of new knowledge that generates products or services or saves money.

This article was originally published on 2002-02-04
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