IT ROI Maximization

To justify a performance premium, IT measurement and performance have to evolve from being a cost center to becoming a revenue generator and strategic business partner.

Traditional IT organizations are perceived as the cost center. The digital mantra for IT leaders is to run IT as a business with high ROI. ROI - Return on Investment, is a ratio or a percentage of the dollar amount the company gains from IT investment effort over what it initially spent in simple terms. It tells business management how well an IT investment repays the company. To reinvent IT from a cost center to a value generator, IT leaders have to fine-tune the operational structures & functions and manage a balanced application portfolio to maximize the IT ROI portfolio.

IT executives should continue to review the ROIs of existing IT investment: IT investment is often one of the most costly investments for running a contemporary business. IT executives must understand and help business leaders decide whether or not a tech investment is worth making. With the exponential growth of information and fierce competition, sometimes IT can make or break the business even overnight. IT leaders must keep in mind which KPIs better measure IT capabilities and capacities or overall IT competency. Business value is created at the intersection of multiple management disciplines. with feedback mechanisms and willingness to work on IT-enabled revenue-enhancement initiatives.

Each organization has specific measurable goals and objectives they have to hit through investing in IT. It’s about spending the money right and getting the right business results. You should not spend to meet a quota, nor should you avoid spending to stay within a quota. You should spend it to make a return. A value-driven IT needs to understand stakeholders’ expectations and propose a service/ solution portfolio that corresponds to both demand and cost drivers with a focus on business priority, build any ROI required to justify the business case and enable IT-driven business benefits flow.

The three keys to presenting IT value are financial returns, return timeline and risk: To reinvent IT as a value generator, IT management has to learn and explore different methodologies to measure and present. IT Return On Investment value proposition should be an overall measurement based on the combination of cost, schedule, quality, performance, and satisfaction of the various stakeholders. A set of IT performance indicators should show a clear link to C-Level executives between IT efficiency and top-line revenue generation.

Besides financial return, IT ROI is expanding into other less measurable, but no less tangible areas that cannot be measured fully in time or dollars, such as employee satisfaction, teamwork, collaboration, etc. Just like any other investment. Digital CIOs need to convince the board and top management to continue IT investment by presenting financial returns, return timeline, and risk, tell the data-supported story about how IT brings tangible value to both bottom-line business efficiency and top-line business growth.

ROI is a concept first and a set of numbers second, and the types of numbers involved can vary widely depending upon what the ROI relates: Many IT organizations are not even trying to address measuring their value to the business as they simply have not employed the methodologies to measure IT objectively, holistically and from outside-in business and customer lenses. First understand the IT performance goal you try to achieve conceptually, then, select the right KPIs which can reflect the IT performance progress for the long-term organizational goals. The way the KPI is measured needs to be an accurate reflection of the behavior the IT organization is looking to exhibit.

Some say IT ROI is more like fuzzy logic these days and causes negative consequences such as lack of business respect, mistrust of project intent and difficulty for IT in entering into the mainstream strategy conversation of the company. It's important to identify suspected key indicators, always follow the “SMART '' measurement rule, attempt improvement, track, analyze, learn, and repeat. Focus on benefit generation, maximize return on investment and contribute to innovations.

CIOs need to understand different measurements and play the number game wisely. Running high performance digital IT means having a higher ROI. To justify a performance premium, IT measurement and performance have to evolve from being a cost center to becoming a revenue generator and strategic business partner that provide competitive leverage to the business’s long-term growth and prosperity.

Posted in: IT Finance,IT Performance Management,IT Transformation,KPIs