“While it is widely recognised that IT can enable businesses to reduce costs and achieve strategic advantage, why is it that many businesses find it difficult to quantify the business value of IT?”
This is one of the central questions posed in a new book – ‘Managing Information Technology for Business Value’ (cover pictured). It was written by Martin Curley, a senior executive at Intel, who spent several years unwittingly gathering material for this book through his ‘day job’ as director of IT Innovation at Intel’s Leixlip facility, a role that involves finding new ways for technology to drive cost savings and productivity increases both within the semiconductor giant itself and the wider business community.
The book’s Irish launch was held last week at the Smurfit School of Business in Dublin, where it has already been designated as required reading on the MBA course. The book’s theme has clearly struck a chord with the wider IT community in the US and UK because it is already into a second print run. It’s not hard to see why. After the colossal IT spending of the dotcom years, businesses the world over have been asking themselves the same question: ‘what did I get for my money?’
In his book, which weighs in at a meaty 288 pages, Curley argues that organisations find this question hard to answer because they have traditionally measured the impact of IT in technical terms – the number of PCs in the business, the speed of processors used and so on – instead of using business-related metrics. He then goes a step further by setting out several strategies for organisations to follow in order to invest cannily in IT for optimal business benefit.
Adapting the software ‘Capability Maturity Model’ developed by researchers at Carnegie Mellon University, Curley presents his own five-level maturity framework which he says can be applied to IT decision making in order to map the business value of technology. An organisation that is stuck at Level 1 has no rational basis for making IT investments and leaves itself wide open to squandering resources on ill-advised projects.
Moving up through the hierarchy, an organisation at Level 3 will have standard practices for developing business cases for IT investment, while one that is at the top of the heap, Level 5, will systematically use investment performance analysis to design, measure and manage its IT investments.
The pivotal concept introduced in this book is the ‘Business Value Index’ or BVI, a tool developed by Intel IT to evaluate technology investments under three headings – improved business value, increased IT efficiency and ‘financial attractiveness’, ie cost. When an IT project scores well on all three counts it can be considered a good investment. While a thorough BVI investigation will require lots of data analysis and mapping, Curley points out that “a quick BVI scan can provide busy IT directors and business executives with good information to make the right investment decisions”.
At a time when it is fashionable to question IT investments and criticise the industry that has driven all this ‘unnecessary’ spending, Curley debunks some apparent truisms about technology. One such is the so-called ‘IT productivity paradox’, a term coined in 1987 by MIT professor Robert Solow who questioned the impact of computers on productivity. Citing a number of more recent studies, Curley suggests there is ample evidence to show that there is indeed a positive relationship between IT spending and long-term productivity.
He also describes as counter-productive the IT spending freeze and cut-backs popular with many organisations in the last few years, and indeed which still are. Using the analogy of car ownership, Curley says that when an owner decides to defer replacement of their car by a year, not only do they miss out on the benefits of the latest technology that would come with the new model, but their existing car is likely to need more maintenance and servicing in the meantime.
This maintenance aspect is important, moreover, because it is the cost of supporting and operating an existing IT infrastructure that gobbles up the lion’s share of most organisations’ IT budgets. Curley notes that this is recognised by businesses such as Delta Airlines which uses the term ‘operating tail’ to describe this costly infrastructure. Only by attacking this cost base, Curley argues, can organisations reap maximum benefit from new IT initiatives.
“Bringing obsolete technology to its end of life is critical to freeing up money for new investments, especially in a business environment where IT budgets are often tied to a percentage of business revenue.”
In an interview with siliconrepublic.com, Curley said he hoped his book would encourage businesses to take a more structured approach to IT investment. “One of the key points of the book is that if you try to solve a Rubik’s Cube without a system you won’t get anywhere. The same goes for IT: unless you have a structured and systematic approach you’re not going to get value from it.”
‘Managing Information Technology for Business Value – Practical Strategies for IT and Business Managers’ by Martin Curley, Intel Press, US$49.95. Although not yet on sale in Ireland, it is available online through Amazon.com or Barnesandnoble.com.
By Brian Skelly