Once we had an IT strategy it would be useful to know how well our IT complies with this strategy and where we have to improve. The most accurate way to do it is to translate the strategy to metrics. If we start measure something we also start realising it. Measuring financial values (costs) is not enough (otherwise the best would be to have not IT at all; zero costs). This idea is anything but new. Robert S. Kaplan and David P. Norton have invented the balance scorecard (BSC) to measure the performance of strategy realisation.
The concept of the balanced scorecard is that the usual financial view (revenue, profit) is important but to limited. It doesn't say much about the future performance of the company and about the realisation of its strategy. So other "views" are needed. Several are possible but usually four are used: financial view, processes view, customer view and future view.
Constructing a balanced scorecard is a time consuming exercise. The first thing to do is defining an IT strategy which is deduced from the company strategy. Although I can't know the strategy of your company there are certain point which apply all the IT departments because all of them are in the same business; they provide services and consulting for their companies.
What most IT departments have to do nowadays:
- Saving costs: It's never cheap enough. All IT departments scan their technical repository for cost saving opportunities every year.
- Develop new services and solutions: Technology is always in the move so an IT department has to invest in new technologies. Besides spending less there is a steady pressure to spend more.
- Optimizing processes: Processes are crucial to the efficiency of a company. And now all processes are software driven. So wether the IT likes it or not it has to deal with processes. (Some people see processes as an IT problem because "it's software").
- Go online: not using the internet for selling goods, cooperating with suppliers, communicating with users etc. is something that no company can afford.
- Improve service and provide new services. Service Level Agreements are the most common methods to measure services. We should try to "level up" SLAs to measure business processes instead of technical parameters.
- Be proactive: IT is always late, IT is always behind. It would be wonderful if all development should go on projects today which business will need exactly when it's ready. It's hardly possible of course, but as better we can approach it the better our company can perform.
An IT BSC could look like this:
Financial view:
- Spending on operations
- Spending of development
- Outsourcing ratio
Explanation:
Money must be saved of course, but not everywhere. If we make day-to day operations cheaper it will save money for our company. And if we increase spending of developing new services or solutions it will earn (or save) money to our organisation. So these values correlate well with company success. Outsourcing is a fashionable subject but is also important. No organisation can concentrate to everything; we must find the few critical tasks which we could or should (for strategic reasons) do ourselves.
Benchmarks:
IT spending per industries. Statistics are available for IT spending ratio in various industries.
Outsourcing. There are different strategies in IT outsourcing so it's practically impossible to give useful benchmarks. However in the car industry (which is high-tech, but mature) large manufacturers create about 30% of value in house. Porsche - which is a super profitable business - creates only 20% of the value in house. On the long run IT insourcing can't be higher either.
Customer view:
There are there groups of customers:
- Company business units and employees.
They are the most important customers of the IT department. The most obvious way to measure their satisfaction is to conduct regular surveys about their opinion on IT, IT services, and their importance. - "Real" customers.
These are the customers of your company. Maybe you have not direct contact to them, but it's important to know they needs especially if customer focus is strategic in your organisation. Unfortunatelly I have no idea for a real good metric. The thing I expect from key IT personal to have customer visits on a regular basis. - Standards, corporate guidelines
Now IT is almost a legal entity; we have to keep BSA friendly inventory, support business continuity, security, ISO standards, CMM levels and corporate standards and initiatives. We need to have a metrics for these (e.g. a simple checklist).
Explanation: I assume that if employees are happy with IT than they get the support they need. Naturally its possible to overdo it (fulfilling needs which makes one happy but have no business value), but budgets are usually limited enough to prevent this. Getting first hand customer information should be very useful either.
Process view:
Here I think there are several ways to measure processes, I prefer two metrics.
- ITIL compliance.
ITIL is a good measurement to optimize operations provided the organisation is not already 100% ITIL compliant. - Project performance.
To measure development performance I suggest to measure project. Projects can be measured by budget, deadline and scope. You should do your best to have no deviances in either metrics in any directions. (I your are under budget or ready before deadline that is fine but means that your planning was pessimistic. And if you could deliver faster once, next time it will be an expectation).
Explanation: not much explanation is needed. Improved processes and successful projects have real cost saving or value crating effect.
Benchmarks: I found hard to find appropriate benchmarks, but ITIL is suppesed to save 10 to 20 percent in operations. A project budget overrun or slips in deadline are so common, that everybody can make a picture about the importance of successful projects.
Future view:
In classic BSC the future is secured by the money which is invested in people in form of training or education. Without denying the importance of this I prefer to measure proactivity. IT is usually reactive; it just does things after it was told to do so. Every project (and projects only) which realises something important but what is not immediately requested (e.g. ITIL implementation, SOA, process optimisation) is proactivity. The weakness of this metric is that a thing business doesn't need now maybe won't be needed in the future either.
Explanation: The value of this metric is obvious; being able to deliver just in time has proved valuable almost in every industry several times.
No comments:
Post a Comment