Posts tagged Productivity
Best of 2009: What is a Pound of Information Technology Worth?
0Today’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.
Poll: Smart Phones in your organization
0Today, our Information Thought of the Day (ITTOD) is a poll subject.
I believe that Smart Phones are a necessary part of extending mobile computing to the workforce. If I had my way every single employee would be issued one and be required to use it according to organizational policy. I, do, realize that this is not the prevailing case at most jobs. Thus, this poll question to frame the issue better for me. I will use this input towards an article that I am writing for this blog. Please contribute and share.
Loading ...I will be sure to share the results. Feel free to add a comment below to add other products that should have shown up on the list.
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 December 15, 2009 ©Scott Coughlin.
Image credit: Volker on Mobile
Information Technology Strategic Goal Alignment
0This week, I am discussing some core concepts of Information Technology Enterprise Management Success. I have written on various topics like this before as part of my IT Management Tools and Productivity series.
As I said earleir in the week here and here, though I stray far and wide in my management consultant product usage, I do find myself frequently coming back to one that I learned from FranklinCovey. Monday, I wrote about their concept for goal making that they call Wildly Important Goals or WIGs. It is part of their The 4 Disciplines of Execution™ organizational consulting program. On Tuesday, I wrote about their second discipline in this series which is to make compelling scoreboards to inform the workforce on how you are doing
Their third discipline is that lofty goals made at the corporate level must get broken down into smaller and smaller, executable portions through a process called alignment. Here I break with their methods and choose instead to use those of an alternate program called The Balanced Scorecard approach.
One of my all time favorite IT Management Tools is Kaplan and Norton’s Balanced Scorecard (BSC). I find that it provides a very effective means for integrating the goals and objectives of the Chief Information Officer and IT Services Departments into the overall construct of their business.
Wikipedia has a great article on BSC. This is how they summarize it:
“The Balanced Scorecard (BSC) is a strategic performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.
By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests. This tool is also being used to address business response to climate change and greenhouse gas emissions.
Organizations were encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on.”
The Balanced Scorecard Institute is another great references with pages of information available to read online.
Kaplan and Norton were professors at the Harvard Business School when they wrote the initial book on the subject. Following its success they founded the Palladium Group to specialize in consulting associated with executing the BSC methodology in real organizations. The Palladium Group offers consulting, training, and education services to enable full implementation. You can certainly learn a lot about the techniques by reading the growing library of books that the team has written on the subject.
It is a little difficult to explain the effectiveness of the BSC method in a small blog post, but it can have transformational benefits for your group. Essentially, it is a process by which you translate your organization’s highest goals into executable, measurable, and correctable action steps. Best of all, since it facilitates goal accomplishment in the financial, people, customers, and learning it prevents business thought that ignores the typical competitive advantages and value inputs from information technology. It also applies equally well to public, private, non-profit, and governmental organizations and I find it to be one of the few business performance management tools that functions equally well when profit is not the driving factor.
The Deposit Insurance Corporation of Ontario has a wonderful website demonstrating their Balanced Scorecard implementation. You can click here to see an example of one of their scorecards at full browser resolution.
If you are looking for an effective, business proven, academically sound method for aligning your IT and CIO shops with the overall objectives of your organization, I recommend you give the Balanced Scorecard method a serious look. I have seen it used effectively for a number of IT organizations.
Tell me what you think of this series. Please suggest IT Management Tools that you have found effective. Have you used or seen used this one before?
That is my Information Technology Thought of the Day (ITTOD) for December 3, 2009 ©Scott Coughlin