Two Views – The Value of Technology for Business

Created by Joe Nemastil on 2014-04-24

Ever heard conflicting views about the value of IT in business? This might shed some light for you.

I just finished reading the Forrester Consulting report "The Business Technology Value Scorecard" published in September 2013, for which 19 different chief information officers (CIO), chief financial officers (CFO), and chief marketing officers (CMO) of various enterprises were interviewed. There was significant difference between the perspectives of the technologist (the CIO) and the business leader (the CFO and CMO). For example:

  1. CFOs and CMOs estimated their IT spending was 8% of revenue, while the CIOs reported their actual IT spending was closer to 5% of revenue
  2. Two-thirds of CIOs interviewed believe that IT accelerates business success, while about half of the business decision-makers believe that IT actually hinders business success.

Given the results here, consider for a few seconds how the business leaders must feel about the results they're getting for their existing technology investment. Remember, their perception is that IT has almost twice the budget than they actually do have. When they look at what they're getting for their money, do you think that maybe their perception of the IT budget versus what's real is having an impact on their overall level of satisfaction with the technology services and products that they're using? 

Now consider what the perspective of those business leaders must be when it comes to authorizing the next IT project. When the business leader thinks their investment in IT is almost twice what it actually is, do you think that maybe they're less eager to invest in the next technology project?

The paper goes on to point out the differences between what business leaders think are the key performance indicators that should be measured for technology vs. what CIOs believe are important. Four of the top ten indicators the business leaders thought were important didn't even make the list for the CIOs.

Those four were:

  • Year to year IT budget growth vs business revenue growth
  • IT spending as a percentage of business revenue
  • Percentage of IT budget that is spent on R&D, emerging tech, pilots, innovations, etc.
  • External customer satisfaction survey score

The third bullet here is significant because the paper also points out that over 70% of IT budgets is being spent on maintaining existing technology infrastructure vs developing new infrastructure to better enable business processes. And this percentage actually grew year over year from 2012 to 2013.

The challenge for CIOs and their peers in the core leadership of any business is to create and share meaningful key performance objectives with one another. Why? Because if they don't, the business is at risk of missing opportunities to make meaningful investments in technology. And worse, they're at risk of creating a dysfunctional culture where IT is viewed as a necessary evil as opposed to enabling revenue creation and customer satisfaction.

Ask yourself, "When was the last time I reviewed the scorecard for IT success in my organization, and am I focused on the appropriate metrics?" If you're relying purely on the perspective of either the technologist (CIO) or the CFO or CMO, you're certainly at risk.  And, if these folks aren't regularly sharing meaningful scorecard data, your organization is probably disfunctional, because individual perspectives aren't based on reality.

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