Posts tagged Money
Best of 2009: What is a Pound of Information Technology Worth?
Dec 23rd
Today’s post is a Best of 2009 Post. It celebrates some of the best content from the site based upon user feedback and analytics. It was originally posted on this day. I hope that you enjoy it!
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Return on investment… value… metrics… measurements… Performance factors…
One issue that I am frequently faced with is trying to quantify exactly what the value of an information technology (IT) investment really is. What is the “proper” metric to use to evaluate, calculate, justify, and measure the value of spending money on computer and networking systems?
ROI Cartoon
Once upon a time….way back in the last century, when computers cost lots of money and were unique items instead of just disposable consumables this was actually easier. The options for doing a classic return on investment (ROI) calculation in the ancient case of replacing the farmers with the tractor is actually very easy to calculate, present, and explain. Trying to justify the replacement of three-year-old corporate generic beige computer boxes with brand new generic black computer boxes is a lot more challenging.
A search of academia and the web for help does not offer much in the way of usable, proven techniques. Here are some excellent resources that try to make the case for a method to calculate ROI for IT:
- Resource Management Systems: “What is IT ROI?”
- Information Week “SmartAdvice: There’s More Than Cost Benefits To Consider When Analyzing IT ROI “
- CIO.com “If your IT metrics do not align closely with business goals, you’re less likely to achieve top performance.”
To do a basic ROI calculation, you need to know the investment, return, and time frame. The time frame can been chosen and the investment is known. The hard part comes in deciding what metric you are going to use to measure and predict the return. “Your performance metrics indicate how you’ll determine whether you’ve carried out the critical success factors you’ve identified and indicate the kind of data you’ll need to gather.” (Harvard Business School Publishing)
So what are some possible metrics to use?
CPU Speed. This is an oldie, but goodie. Many are familiar with Moore’s Law and had grown accustomed to expecting to get more speed for the same dollars every few years. Unfortunately, we all ran up against silicon, metal, and heat physical limits a couple of years ago. Today’s CPUs are actually running slower than the clocks’ of ones two years ago. This is not to suggest that today’s multiple core, hyper threading CPUs are not faster at the same clock speed as yesterdays, just that CPU speed alone is a poor measure for an ROI calculation.
MIPs or Instructions per second. Again, the attraction here is simple to explain, but elusive. There are just too many “moving parts” in your average information system. Memory bandwidth, network throughput, cache sizes, etc. Since you cannot reliably predict the specific bottleneck that is relevant for your chosen software applications, this is just too risky of a metric to justify big purchases on.
Power Consumption. Green IT is all the rage right now. Many would like you to believe that it is your Earth Day duty to buy new computers due to their almost guaranteed lower power consumptions to machines only a year old. Unfortunately, this case requires assumptions about the costs of electricity, HVAC, and space that are often out of the control of the strategic purchaser. How much do you think a kilowatt will cost next year?
Cost. Well this is certainly the easiest to use. It is fairly easy to show that newer is cheaper to buy and power than current is to support and protect. It also goes a long way to explaining the “rush to the floor” that PC prices have seen in the past five years. Something deep inside us though, reminds us that cheap is not the same as good.
There are certainly many others performance measures you could choose, but the point is that none adequately provide a much-needed measure that is explainable, quantifiable, and verifiable enough to base major acquisitions off.
If you need to calculate the value for a gallon of gas, a pound of food, or a box of pens, I have tools for you. But, if you want me to tell you with absolute certainty the ROI for a theoretical IT purchase, I first need to figure out the IT’s value.
What is the value of a pound of IT to your organization? What metrics do you use?
That is my Information Technology Thought of the Day (ITTOD) for December 23, 2009 ©Scott Coughlin.
Don’t forget that The IT Thought of the Day Webstore is now open for the Holiday Season! Great selections and anything that you buy at Amazon.com through it helps us without costing you anymore! Happy Holidays with wishes for a joyful New Year.
Managing the Polarity of Information Technology User vs. Purchaser Desires
Jul 24th
I have written previously about how polarity management needs to be a core competency of Information Technology Professionals.
Information Technology (IT) Management (ITM) requires polarity management to balance the needs of users as well as those of the stakeholders who pay for new and upgraded IT systems. Most users really don’t care what their IT systems cost. They desire ease of use, performance, individualism, and aesthetic. The parties responsible for resourcing IT systems, on the other hand, usually value cost efficiency, standardization, simplicity, and longevity. Both of these parties have requirements that are desirable, admirable, and valuable. Unfortunately perfecting providing for either group is impossible and mutually exclusive. Hence the definition of a polarity requiring management vice a problem deserving a solution.
My point is not that one of these attributes is more important, desirable, or better than the other. I see a lot of IT Departments that are obviously aligned much more in favor of one than the other. Most of them don’t even realize that they have slowly drifted there over time with the best of intentions. As you look at your work sites or organizations, which rings more true? Are the IT Departments running themselves ragged trying to meet everyone’s individual hardware and software needs? Or, is the Help Desk more closely regarded as a plane of hell by the employees? Is there an “us vs. them” mentality present? Is the CIO constantly trying to explain to the other C-Level execs why he is spending so much money or is he constantly touting new cost savings measures? Are the questions on the user questionnaires so bland as to elicit no input or suggestively brutal? Does everyone have the same machine on their desk or is there a mix of brands, colors, and sizes? Are users constantly logging into publicly available web based services to “get work done” or are they using local applications?
A great book that describes the proper frame of reference is Polarity Management: Identifying and Managing Unsolvable Problems by Dr. Barry Johnson.
The Learning Exchange has a great summary of Polarity Management:
“Polarity Management is powerful tool that leverages the best of apparent opposites resulting in win-win solutions. Many challenges are not problems that can be solved with either/or solutions. Rather, they are dilemmas or polarities to be managed. Polarity mapping provides a complete picture of the interdependent opposing forces that often create gridlock. Working with the upsides of both poles, predictions can be made for the types of change that will result from any strategy.” (link )
Polarity Map
You should think of user needs and system resourcers as trying to move the positive poles of two magnets near each other. There is a stable resistance point where they will stay, but if they are forced any more closer they deflect and end up ruining any hopes of stability. Like the author says, there is no such thing as being only in the state of inhaling or exhaling, you need to always be in the perfect balance as you manage the breathing polarity.
I think that IT Departments fall into this predicament for all the right reasons by either thinking of themselves only as customer service agents (i.e. Help Desks) or utility providers. Obviously, you need to strike the right balance for your organization. If users run the place, you will lose cost controls, create unnecessary security risks, and be constantly fighting configuration management challenges. Of course, if money is the only metric, your users might as well not have computers if the ones provided don’t meet their needs for production and support that is not, well, supportive, might as well not exist. My overall comment, is mainly, that as a leader, you often need to frame issues correctly for your teams, supervisors, and users in order to begin to manage them correctly. The issue of user needs vs. corporate needs is a polarity to be managed — not a problem that can be solved. The sooner that all parties come to agreement on that and start seeing the challenge for what it is, is the sooner that your information technology systems begin to be contributors to your competitive differentiation and stop being hurdles to both your corporate bottom line and users desires.
Do you think that I characterized this challenge of the IT Department correctly? Do you know of any case studies showing success? How does your organization balance this issue?
That is my Information Technology Thought of the Day (ITTOD) for July 24, 2009 ©Scott Coughlin.
Image Credit: polaritymanagement.com
Poll: Most Required Information Technology Investment Area
Jul 16th
Today, our Information Thought of the Day (ITTOD) is a poll subject.
There is never enough money to do everything that we want to do. Since information technology (IT) is often one of the last areas that resources get assigned, it makes the prioritization of those small resources even more important. I would like you to share your thoughts on the question of where to spend the next $1 that you are allotted.
Loading ...I will be sure to share the results.
Do you like polls as a daily topic? Do you have a recommended one for another week? Please let me know.
That is my Information Technology Thought of the Day (ITTOD) for July 16, 2009 ©Scott Coughlin .