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Measuring IT Costs and Value - Maximising the Effectiveness of IT Investment
Butler Group, Sep 2005, Pages: 196
Although every business invests money in its IT resources, it is often the case that these same businesses have very little idea if the investments have paid for themselves. Many companies tend to think of IT as being something that they have to spend money on to keep pace with their competitors, and can even resent the fact – the result being that IT is looked on as being a cost centre, something that has to be maintained, instead of a resource that could improve the company’s ability to compete in the market place.
This report looks into the reasons why IT can be so badly misunderstood. Some of the most common problems involve the fact that measuring IT performance is a difficult and time consuming exercise, and that many companies do not believe that they have the time, money, or right people to keep doing this job – however, we argue that failing to do this measurement, and to keep doing it on an ongoing basis, is absolutely essential. It should be common sense that we cannot decide how much something is worth unless we can measure what it means to us – but businesses have allowed themselves to be put off by the difficulty of doing this.
Having established the importance of measuring the performance of IT and the effects that its use has throughout the business, the Report defines and assesses the various methods that can be used, explaining the differences between them and the areas where their use is most appropriate. This is where methods such as Enterprise Architecture, business case, and Balanced Scorecards come into their own. A well-prepared business case is a way of putting forward project details in a standard format, which helps purvey professional competency and makes it easier to compare projects. Balanced Scorecards can provide a mechanism for monitoring and conveying IT performance that simply encapsulates the state of the IT environment. However, it is necessary for IT management to agree a small number of metrics with stakeholders, get buy-in from staff, and instigate a regular review process.
The role of IT management is shifting away from being the guardians of technology to focusing more on aspects such as investment planning, budgeting, governance, service quality, and risk management. Understanding value is crucial to all of these activities, making this a Report that should be of interest to a wide range of readers.
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