IT Value & Benefits Realisation

 In 2003, Nicholas Carr wrote an influential book and paper in the Harvard Business Review that

said “IT doesn't matter”. His thesis was that because technology had become a commodity, its use

in organizations could add no lasting competitive edge, as other organizations would merely apply

the same commodity technology to catch up within a very short time. The subsequent issue of

Harvard Business Review had a rebuttal by many IT industry leaders, CIOs, and academics. Their

argument was that it wasn't the technology (or the commodity) that added value to organizations'

competitiveness, but the unique application of that technology. However, the damage had been

done. With Carr's message finding willing ears among CEOs around the world, the pressure is on

CIOs to prove how and where IT adds value in their organization. Many CEOs are savvy enough

to know that IT adds value, but it is still useful for CIOs to identify and report on where IT

specifically adds value.

Ovum view

 The issue of IT value has been discussed for many years, and remains topmost in many CEOs’

minds, usually after the cost of IT. Cost and value are two sides of the same coin. Costs, however,

are easier to prove and manage. Value on the other hand requires both IT and the business to be

 involved, which is where the problem arises. It is well documented that on implementation of a

system, the focus shifts from delivery against a specification (to achieve a business outcome), to

ensuring that the system is stable and efficient. Therefore, once implementation occurs, most

organizations lose the value-realization perspective. Value realization is difficult because the full

cost of an IT solution needs to be tracked over the life of the solution in order to establish the

differential between cost and return. Establishing the return of an IT solution is even more difficult,

because it involves both business and IT inputs and effort, and interestingly neither party seems to

be willing to expend the effort. Benefits realization requires more than a post-implementation

review. It also requires a benefits-realization plan in which the objectives behind the IT investment

are mapped out and a plan (an outcomes plan) is executed to achieve the benefits.

There are, however, some issues with benefits. First, many anticipated benefits are intangible, and

second, the more strategic the investment, the more intangible the benefits typically are. One

researcher suggested that the ratio of intangible to tangible benefits should define the worth of the

IT investment to the organization. His reasoning was that hard tangible benefits are only delivered

after the intangible benefits are achieved. Another researcher calls these intangible benefits

“intermediate benefits” because they are interposed between the implementation and the delivery

of tangible benefits.

It is the Ovum view that defining and communicating the value of IT is the next step in the

normalization of the outmoded relationship of cynicism that has existed between IT department

and the wider organization.

Key messages

  Historically the onus has been on CIOs to demonstrate value of IT in the business

  The value of IT is not in the technology, but in how the technology is used

  There are four value propositions that IT brings to business through IT operations and

investments: value preservation, value unlock, value add, and value creation

  Look for value opportunities in the organization's annual report. These factors are

important to the business, and IT should identify the contribution that they make in

these areas

  Communicating value requires a marketing approach where messages are matched

with stakeholder segment

Contact us for more information on "Managing the Business Value of IT" by Terry White and Craig Terblanche for Ovum.