Monday, October 27, 2014

Is IT Benchmarking valuable or a Waste?

Metrification for its own sake goes way beyond useless. It's actively detrimental.

Many organizations spend hundreds of thousands of dollars on benchmarking, the results came back and then there was the "So What and Who Cares" response. Is Benchmarking valuable or a waste?

It can go either way; metrics can be useful, or they can be a waste of time. "If you're not going to do anything different based on the results of a test, then don't do the test." (Deming)
So, before a benchmark or any other metric is applied, the proposer needs to specifically state what actions will be taken in response to variations in the value of that metric.

There needs to be a strategic reason for benchmarking in the first place. Executive support of the initiative is critical so their buy-in to change can drive the better results. If an organization is not willing to change directions based on poor results from a benchmarking study, then it should be cautioned whether it is a good use of time, money and resources in the first place.

The question should be what benchmarks shall be used, and who you are benchmarking against. Every organization is different with different requirements, technologies, and workforce. For example, benchmarking a leading adopter of technology who uses technology very strategically against a laggard adopter who is focused only on cost control, won't do you much good, because obviously the numbers are going to be very different. Benchmarking often provides good data and highlights issues and it’s incumbent as IT leaders to use that data in a way that motivates and improves the organization. However, many organizations use it as a hammer to drive out the cost. It can become a demotivator to the workforce and cause organizations to lose competitiveness while achieving only a short term cost improvement. So the benchmarking shall consider the following factors as well:
1) Industry
2) Relative Size
3) Technology Adoption Curve / Strategic Use of Technology

A well-defined analysis shall highlight the issues and provide valuable insight. A well-defined analysis, supported by a current database of metrics and a robust methodology is best viewed as a diagnostic tool. It can be seen as "switching on the headlights when driving through rough uncertain terrain in the dark". As opposed to comparisons against survey gathered data, which suffer from the anomalies of averaging (comparing apples with strawberries), a detailed metrics analysis of variables, compared against carefully selected peers, for each service tower, can highlight issues and provide valuable the enterprise and to the service providers involved.

Benchmark can be valuable at both macro and micro level. At the macro level, the CIO needs to be focused on a complete picture. They need to be able to identify that for every dollar that spend on IT, you generate x dollars in profit and that is contributing to the overall company's performance relative to its peers. On a more micro level, benchmarks can help procurement understand what the appropriate cost of goods and services in the market should be to be able to stay on top of purchasing contracts. Benchmarking operational costs helps to deal with the endless tension in the allocation of resources between keeping the lights on today vs. the innovation needed to make sure you are around in the future.

Benchmarking may get used as a stick, but as a management tool, it remains popular for its value in providing insights and metrics to help chart a course....hopefully towards better governed, efficient, effective and ultimately agile business catalyzed by IT and achieve a more tangible high-performing result.


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