Measuring The Business Value of IT

S
E
C
September 25, 2006 I
T
Measuring The Business Value
C
Of ITby Craig Symons A
R
P

T
S
E
B
Helping Business Thrive On Technology ChangeBEST PRACTICES
September 25, 2006
Measuring The Business Value Of ITA Survey Of IT Value Methodologies by Craig Symonswith Laurie M. Orlov and Lauren Sessions
EXECUTIVE SUMMARYThere's an old management axiom: You can't manage what you don't measure. Yet many organizations do a very poor job (or no job at all) of measuring the business value of their IT investments; but maximizing the business value of IT investments is the primary objective of good IT governance. A number of formal measurement methodologies exist for measuring the business value of IT. Simple ROI or other ?nancial metrics are not good enough. By employing a consistent, repeatable, credible methodology that both the business users and IT are held accountable for and that measures projected business value as well as the actual value delivered, organizations can signi?cantly improve their IT investment returns. Four existing methodologies can be adopted as is or customized to suit speci?c needs. Firms should pick one, institutionalize it as part of an overall governance framework, and embed it in IT portfolio management.
TABLE OF CONTENTS NOTES & RESOURCES2The Business Value Of IT Can Be Measured Forrester interviewed a number of vendor and 4Select From Credible IT Value Methodologies user companies in preparing this report.
14Methodologies Compared Related Research DocumentsRECOMMENDATIONS "Optimizing The IT Portfolio For Maximum 16Consistency, Credibility, And Accountability Business Value"Are Key September 30, 2005, Best PracticesWHAT IT MEANS "The Economics Of IT"17IT Investment Decisions Are Fact-Based June 6, 2005, Best Practices"IT Governance Framework"March 29, 2005, Best Practices
© 2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forrester's Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each ?gure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions re?ect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com.2 Best Practices | Measuring The Business Value Of IT
TARGET AUDIENCEChief information o?cer, IT operations/engineering professional, enterprise architecture professional
THE BUSINESS VALUE OF IT CAN BE MEASUREDMany IT organizations are under increasing pressure from the board of directors, executive management (CxOs), and business unit managers to demonstrate and improve the business value of their IT investments. But IT organizations still struggle to measure business value. Many of the attempts to do so have been focused on ROI measures at the front end as part of developing a business case for the IT portfolio's proposed investments - but these are only estimates of 1expected business value. Actual delivered business value can only be measured by taking a life-cycle approach, working with the business to measure actual bene?ts after the project is complete. This practice is beginning to gain traction but is not done consistently or broadly (see Figure 1-1).
Firms that strive for best practice in IT portfolio management need to apply a credible standard methodology across the enterprise to measure the business value of investments, both when proposed and when delivered. The good news is that a number of IT value methodologies have emerged that can be employed in the portfolio management process. The key is to adopt one and begin using it.
Getting Started With IT Value ManagementOrganizations that obtain the maximum bene?t from their IT investments recognize that, today, most IT investments involve not just technology but business change as well. They are really business investments with a technology component. The implications of this are profound for IT and its business peers. Success with IT value management starts with joint accountability between IT and busine... [download for more]