July 2006 Survey: Most Companies Struggle to Measure the Value of IT

By Allan Alter  |  Posted 07-25-2006

If most companies really know how to measure the business value of IT, we'd see a clear consensus on which metrics to use, and IT executives would feel those metrics accurately capture business value. But our data indicates just the opposite: Companies use many different metrics, and the most popular metrics are used more often by companies that aren't very good at measuring value. Companies that have developed their own metrics fare somewhat better, but many of those are also dissatisfied. It appears companies aren't picking the right metrics, don't know how to go about measuring, or both.

Finding 5: How best to measure IT's value?
No one "right way" to measure the value of IT emerges from our study. The most common and simple measures, such as time-to-payback and savings-minus-costs, are the ones most often used by companies that lack accurate measures of value. And except for balanced scorecards, more sophisticated measures such as internal rate of return and net present value, though also used fairly often, don't clearly correlate with accuracy. A reason for the jumble: In four out of five companies, different executives want to see different metrics, forcing IT to provide this potpourri.





Research Guide:

  • Finding 1: Only six out of ten companies measure the business value of IT.
  • Finding 2: Do CIOs measure business value often enough?
  • Finding 3: Skepticism about ROI and business value metrics remains high.
  • Finding 4: IT executives exaggerate IT's impact on productivity.
  • Finding 5: How best to measure IT's value?
  • Finding 6: Many technologies and IT services are meeting, and even exceeding, their business value expectations.

    Read our previous surveys on ROI and business value:

  • ROI 2004: How Well Do You Work with the Business?
  • ROI 2003: Do You Have Any Faith In Your ROI Numbers?
  • ROI 2002: How Do CIOs Figure ROI?

    Related stories:

  • Roundtable: The Trouble With ROI
  • Howard Rubin: How to Measure IT Value
  • Christopher Gardner and Ray Trotta: How to Determine the Value of a Project
  • What Does Wall Street Think of Your Technology?