Can you justify your IT spending as an investment that creates an asset with value? If you can---let us know! Only a few IT executives, and CIOs can say the same?
I have witnessed a tenfold increase in IT investments in US firms alone over the past 15 years or my career. Given such large investments, I can conclude that managing IT is one of the single most important and critical technology management issue facing most firms? Well, many organizations are poor learners and few have cultures that accept failure as part of the learning process. Senior managers becomes dissatisfied with their CIO’s ability to understand and control the IT function, or even how to measure the value the firm receives from IT spending and investments. Hence on average CIO have a life span of 2 – 4 years.
Less than half of many hospitals calculate their ROI of an IT investment after the project is completed. Hence there is often little confidence in either the measurement or the analysis. CIO’s are typically measured on cost, not performance which can be detrimental to their career. So for most CIO, it’s hard to act on logics, when fear gets in the way.................. considering ROI remains a primarily tool for justification not for measuring value.
The value from an IT investment comes from its role in creating an asset which has value. Such investment typically involves the use of resources to create or acquire an asset, from which a return or benefit is expected. Senior managers should measure the value of what their CIO does with his/her resources by comparing projected returns or benefits (not cost)—however the reality is that senior managers primarily support IT investments which provide the “best” return (money) and not necessarily the best value.
The use of resources (e.g., money) can lead to very different types of investments, creating different types of assets with very different types of return and value; so finding value from an IT investment is an elusive task! It’s not the money that creates the value . . . it’s what you do with it!!