Quantifying the Business Benefits of I.T. Operations

Objectives (The What)

That "I.T. is done for a Business Benefit" seems axiomatic.

But where's the evidence after 50-60 years of computing? It's not coming out our ears - just the reverse.

Businesses understand the importance of hard data and it's through analysis for marketing, but don't apply the same techniques or management principles to their I.T. Operations.

I'd like to model and quantify the Business Benefits of I.T. Operations across multiple organisations to provide baselines, benchmarks and trend analysis. The impact of all aspects of I.T. is beyond the scope of a single researcher project.

Approach (The How)

Data is fundamental input for analyses. Leveraging what's available means the outputs can be commercially reproduced and aer within the project budget (zero cost).

Three separate data streams will be mined:
  • Historic "ITSM" tool data from multiple organisations.
  • Detailed I.T. accounting information from selected organisations.
  • Primary research in one organisation to collect and report "FTE equivalents provided" by I.T.

[FTE = Full Time Employee. Otherwise, "virtual employees". What head count and cost would be needed to provide similar services with 1965 technology.]

Importance/Value (The Why)

There propositions are to be tested:
  • I.T. is done for a Business Benefit.
  • Business Benefits, tangible or intangible, should be measurable.
  • Organisations these days are dependent on their I.T. Operations.
  • I.T. cuts acros all segments of current organisations.
  • I.T. defines the business processes and hence productivity of the whole organisation.
  • What you don't measure you can't manage and improvve.
  • Improving the effectiveness of I.T. Operations requires reliable metrics.
  • Commin I.T. Reporting Standards, like the Accounting Standards, are necessary to contrast and compare the efficiency and effectiveness of I.T. Operations across different organisations or different units within a single organisation.

I.T. is a cognitive amplifier, it delivers "cheaper, better, faster, more, all-the-same", through the embedding of finely detailed business processes into electronic (computing) systems.

For simple, repetitive cognitive tasks, computers are 1-5,000 times cheaper than people in western countries.

From this ampflication effect, computers still provide the greatest single point of leverage for organisations. The underpin the requirement to "do more with the same", improving productivity and increasing profitability.

Subtle shifts in this whole-organisation amplification ratio (e.g. from 100:1 to 95:1 or 105:1) are impossible for isolated individuals to detect unaided. But they make very large differences to the 'global' organisation output and productivity.

In retail businesse, the gross margin is often around 2.5%. Reducing whole company productivity by 5% will destroy it's profitability, and without any metrics, will be impossible for any management team to identify and resolve.

The few studies of "IT Efficiency" that are available show that IT effectiveness is highly variable and unrelated to expenditure.
My proposition is that "intuitive management" of IT is stretched well beyond it's useful limits and needs to be replaced by evidence-based management.

The value-add to business is two-fold:
  • manage downt he input costs of the I.t. infrastructure and,
  • quantify the "cognitive amplifier" effects across the whole organisation to make informed decisions on optimum 'global' investment/expenditure on I.T. Operations.

[There's the 1990 HBS or MIT study into "White Collar Productivity" - reporting a decrease in the first decade of PC's]

Previous Work (What else)

There is a dearth of published material/research in this area.
The "State-of-Practice" is "NEVER DONE".
There is much opnion in the area, without substantive evidence: e.g. Nick Carr and "Does IT Matter?"

"Commonsense" IT Practitioner approaches, ITIL and COBIT (others?), do not address the measuring and managing of I.T. outputs and their business effects, ultilisation and effectiveness.

The McKinsey report/book on European Manufacturers and their I.T. expenditure versus financial performance shows there is no co-relation between effort (expenditure) and effect (financial peformance).

Jerrry Landsbaum's 1992 work included examples of their regular business reports - quantifiable and repeatable metrics of I.T. Operations phrased in business terms. This work seems entirely disregarded.

Hope to find (The Wherefore)

  • Model I.T. Operations performance within and across similar organisations.
  • generate tools usable within organisations to collect/report their own metrics.
  • Define a set of useful I.T. Operations performance and Business Impact metrics.
  • Model inputs to Business and Business Utilisation/Outcomes.

Report Outline

  • Analyse ITSM tool data. Derive KPI's, Internal Baselines/Trends, Cross-section Benchmarks
  • Annual I.T. Operations Report
  • FTE Employee equivalents - Count and Cost
  • Why IT Matters to the Business.
  • Gaps in Service Management models - ITIL and COBIT
  • Adding I.T. Operations to Management Theories.
  • Advancing I.T. as a Profession
  • Further Work and Research Questions

Execution Phases

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