Friday, December 7, 2012

IT Performance Management: Two-Level Value Delivery & Balance Scoreboard

IT performance needs to well reflect the business value in which IT can contribute both strategically and operationally.

Traditional IT is still being labeled as cost center, as value hasn’t been conveyed in a structured or quantified way, or it only focuses on measuring internal value (cost efficiency, internal customer satisfaction), but it may not reflect the full set of value IT can bring to accelerate business growth or delight end customers. The issue here is: what is your understanding of value? Is it an economic measure? Is it a competitive measure (when you compare with other IT departments) or other perceptive values? How are you monitoring and quantifying IT Department value in your organization? The tool is secondary if you don't speak the same language with your business partners. Therefore, both strategic and operational metrics are needed in order to paint a full picture of IT performance.

1.    Strategic Value

Strategic value is the ability to align with the long-term business vision of the organization. If companies are to survive and prosper in today's competitive environment, the corporate IT portfolio planning function needs to plan IT initiatives strategically. They must use performance metrics that are derived from the overall strategies of their business. Strategic IT KPI is connected to KPI of the organization.

  • IT Value is not only about Financial Data. Historically, performance measurement systems for most businesses have been financing driven. However, in many business situations, financial indicators only cover part of the story. Every measure selected should be part of a link of cause-and- effect relationships, ending in financial objectives that ultimately affect the growth and long-term perspective of the organization.
  • Report-IT Performance in Business Term:  In the enterprise, being able to communicate IT value depends on being able to report your results in business terms, relate IT costs to a revenue stream, do end-to-end service costing.  If the business units and IT are not held accountable to the benefits used in project business case justifications, a lot of the measure stated here matter only for the moment they are stated.
  • Benefits realization: The key thing in measuring value, by the IT organization as well as the business is the process of benefits realization.  Start looking at those business benefits assumptions as a portfolio, not just project by project. Measurement systems must be in place as part of overall enterprise portfolio management to ensure the value proposed in any business case is actually realized. The true value delivered by IT and the business units must be recognizable, tangible, and impact the business result. Also, business-driven and funded initiatives (sometimes called "pay-to-play") may have their own project-level metrics. For example, a projected ROI, increase in sales, reduction in time to market, reduced processing time, etc.

2. Operational Value

IT operational value is the ability to run short-term operations successfully. IT has a direct impact on efficiency (productivity which includes operating expenses) and effectiveness (on-time delivery, inventory, write-off, quality, levels, capacity planning). Operational KPIs are connected to functional services, and operational tasks are connected to the service desk system.

  • Help Desk service measurement (how many calls were a loss? how many service tickets were opened, uptime, TTR, ticket and call queue tracking, etc.} are excellent for operations and can inform quality improvement initiatives (10% reduction in defects or ticket types. etc.).
  • Service availability metrics: Network availability (how much time was it up per week? how many Incidents? what applications were impacted and for how long?)? There are a total number of incidents, incidents solved later than SLA, and so on.
  • Daily operational tasks realize strategic Value: The operational tasks are created to achieve the global task and control business operations day by day. And if the operational tasks are done well, finally the strategic value can be realized.

3. The Balance Scoreboard

The balanced scorecard is the balanced scorecard model offers a way for a corporation to gain a wider perspective on its strategic decisions by considering the impact on finances, customers, internal processes and employee satisfaction. The analysis takes into account financial and non-financial measures, internal improvements, past outcomes and ongoing requirements as indications of future performance.

A well-defined scorecard should contain a good mix of outcome measures (or long-term strategic value) along with performance drivers to track the progress in the short term (operational value)  in spite of capturing multiple perspectives, the balanced scorecard must still retain a strong emphasis on financial outcomes. IT departments can apply the balanced scorecard with well-defined KPIs to quantify and qualify IT and reflect its business value, to keep their business-focused initiatives on track with the overall business plan of the enterprise, as well as IT operational deliverable.

In conclusion, IT performance needs to well reflect the business value in which IT can contribute both strategically and operationally, to capture both short term gain and long term win, the well-defined scoreboard can also help to leverage IT investment priority, PPM and customer satisfaction, and also make continuous improvement via analytics and process optimization. In essence, working with business partners to define IT strategy and how it's measured - often in business terms - is a very good approach to demonstrate value.


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