What Is The Real Value of IT Systems?

In many companies is IT accepted as a "sunk" cost that you simply have to live with in order to survive in todays challenging business world. And in addition we are told by vendors, advisors and all IT related magazines & websites that if you don't regularly update your hard and software you run the risk of not being able to do your business at all!! And to ensure you keep an leading advantage over your competitors in the market, you better also invest a substantial amount of money in the latest developments in IT (Cloud, Paas, Saas etc) and in defending your data (Cybercrime).

Without attempting to challenge the validity of the above, I would like to dedicate in this blog to go one step away from this and discuss the real value that IT systems bring to your organization. I don't mean the sum of the IT costs (what most of times is used to determine the value of IT systems) or the value of the output of IT systems (products, reports etc). No, I want to talk about the REAL value of IT systems. I see many companies struggling with the determination of it and therefore think it's important to share & build knowledge & experience on. 

In the book I just published ITPFM - IT Portfolio Management I have captured this issue and describe how companies have to go back to their basics (core business processes) to make a clear trade of between profit made by the company versus how IT systems (as a tool) contributed to that. I go even one step further and go back to how automation started in the first place; which for  many companies be a "bridge too far," but it does help to really come to the concrete value IT systems provide to your organization. I also developed a simple model to start with developing a clear picture of the actual value of IT the simple ITPFM value model (c). The core element of it is to determine core Business Capability of your current IT landscape. 

To help you starting; ask yourself the following questions when reviewing your IT budget for next year:

  1. Do I really need this new & latest technology that is proposed to implement?
  2. Will it really (proven) bring additional profit to my company (or help reducing costs) or is it simply a nice to have show our success to competition, vendors and customers?

To help you getting more clarity on this; just select 2 - 5 IT projects in your company and do a Post Project Value/Benefit realization review (and please assess all numbers used on reality vs whish full thinking!!). This will give you quite some insight to what extend IT (and IT projects) add real value to your organization.

Off course for some companies, especially the New Economy companies like LinkedIn, Facebook, Uber and Twitter, are IT systems essential for their existence. Without IT their company simply doesn't exist! But for many other organizations IT systems only support a specific production/service process. For all these companies the same question applies as I mention above. What is the REAL value of IT for my organization?

I am inviting you to share your views, thoughts and experience in this post/blog. You can also send them directly to me by email adeniet@alanopress.com