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September 18, 2005

IT Value versus Business Value

Many of the problems in understanding "IT's value to the business" stem from the desire to jump from point A to point D without going through points B and C.

To trace the proper connections, some basic working definitions are needed. Here, "performance" refers to the relative level of achievement through execution, while "value" refers to the importance of the difference made by the performance.

From that, the points "A through D" in question are:
A - IT Performance
B - IT Value
C - Business Performance
D - Business Value

The usual assumptions are that "IT value" should be measured in terms of business performance, consistently associating the utilization of IT with the business outcomes in a causal relationship. But since IT cannot be used effectively by the business unless IT is managed, the first criterion of IT's potential benefit is whether selected IT resources are appropriate to their intended usage. IT specifications make it clear that "IT performance" must establish the "rightness" of the employed IT for the responsibility planned for it.

Next comes the manageability of the selected IT resources, which determines the day-to-day "value" (i.e., the effective difference to intentions) of the IT.

But successfully bringing the tool to enable the business task does not mean that the task will necessarily be executed well. The harsh reality is that many tasks are now originally formulated on expectations that are impossible to support without IT -- yet the tasks have other dependencies as well, and IT will not "cause" the task to succeed. Meanwhile, utilization of IT per se may be suboptimal, most likely due to complexity and competition in its deployment.

Respecting IT's power to inhibit planned execution, business-oriented management of IT can take a highly proactive stance on mitigation as a support strategy for business capability. The goal is to actively cultivate an operating environment with high compatibility to business performance objectives. For IT leverage, these compatibilities most notably include IT resource management (ITRM), business process management (BPM), change management (CHG) and network/systems management (NSM). In the picture below, we see how business-level concerns with managing the operations environment surround yet are joined by the IT management areas.

In these areas, minimizing inhibitors to leveraging IT resources effectively fosters greater ability to concentrate on driving productivity towards planned and actual impacts that distinguish the business's value.

Posted by Malcolm Ryder at September 18, 2005 10:47 PM

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