Finding IT`s Business Value

By Bob Cameron  |  Posted 08-28-2009

Finding IT`s Business Value

In a recent Forrester survey, only 15 percent of IT leaders declared themselves to be fully aligned with the business.

What that tells us is that IT-business alignment isn't just a problem--it's a plague.

Business executives paint a similar picture. Nearly 80 percent of the 600 business executives who responded to Forrester's Q3 2008 North American Business Online Survey ranked IT "somewhat" to "critically" important for key business activities, such as lowering the company's operating costs, improving workforce productivity, and acquiring and retaining new customers. But less than half these business leaders saw IT as doing "well" to "excellent" in supporting those needs.

Alignment always seems to top the list of CIO priorities and concerns. What's behind this perennial challenge? IT leaders told Forrester that improved perception of IT is driven first by IT doing a good job--like improving systems and network reliability, increasing IT process quality and consistency, and managing project execution. But beyond doing a good job, business' perception of IT is improved by effective metrics and IT value communication.

Many CIOs themselves cause much of the problem; to put it bluntly, they misunderstand the role communication plays in IT's business relationships. The real driver of the alignment gap is the all-too-often-unanswered question: What business value results from IT's spending?

The current economic recession isn't helping, as CIOs struggle to find the business value that rationalizes and justifies their budgets in light of enterprise-wide cost cutting. How do the CIOs cause the problem? They measure and communicate IT's operational excellence instead of IT's business value. They talk uptime, availability and server utilization, instead of product-line profitability, business cycle times and customer satisfaction.

And what about measuring business value? Only a third of the IT leaders in a Forrester survey measured postproduction to see if projects delivered the value that the business case anticipated. And less than half that number track IT's operations costs associated with enabling key business activities.

Value-Based Alignment

We see this value-based alignment issue everywhere. When Forrester Research asked the CIO members of the Forrester Leadership Boards to select a subject for their quarterly CIO Group report, an overwhelming number chose communicating IT's business value to the CIO's peers. And when Forrester asked its customer advisory council to choose the theme for the 2009 Forrester Technology Forum, again, the responses were striking. The majority chose IT's value proposition as the meeting's focus.

CIOs don't proactively drive a business-value point of view. Many CIOs may address business value when they start conversations with business execs, but those discussions devolve quickly into IT issues. Others drive business value themselves but don't hold direct reports accountable. And still others wait for business to ask them to participate in business conversations instead of proactively putting business on the table.

So what's the answer? In recent best-practice research for Forrester's CIO Group, we found that leading IT execs make business-value communications integral to everything IT does.

They assure that IT's internal practices add business value to their focus, they transform IT's interactions with other business organizations and external partners into business interactions, and the CIOs self-identify as the leaders in this communication (see graphic on next page).

The internal IT practices identified by the best-practice CIOs we interviewed drive business value as the basis of IT's activities. They begin with IT's metrics. Instead of communicating IT's operations excellence, their metrics track what the business cares about; they measure IT's performance as part of business activities, like representing IT-transformation projects in terms of competitive advantage or tying IT shared services to business results.

Best-Practice CIOs

The best-practice CIOs also add business value to IT's work with other organizations--both IT's internal customers and external partners and customers. To involve business in how IT manages its relationship with internal customers, these CIOs are embedding key IT staff in business teams, including relationship managers, business analysts and project managers. And by enriching key IT demand-management processes--like IT portfolio management and chargeback (virtual or actual)--these CIOs create the transparency and predictability that enable business leaders to make decisions about IT spend. As for working with IT's external business partners, the best-practice CIOs strongly encourage IT's suppliers to make business value core to how they deliver and manage their products and services.

Making business value core to IT's internal and external efforts isn't the end of the best-practice efforts to communicate IT's value. They also personally position IT's value, emphasizing their individual efforts as a linchpin for IT's overall value-communications program. They lead by example, for instance, revealing IT's successes with Web 2.0/social networking technologies, to demonstrate their potential value to business users. And these CIOs make IT marketing an explicit, targeted effort, and they work across IT to plan, target and orchestrate IT's communications with its business customers.

For CIOs to get started on the path to reducing IT-business alignment issues, they should take actions based on the maturity of their organizations. The less mature IT shops--those with limited levels of metrics and consistent IT processes--should focus on the basics, putting value into the core IT processes they develop. More mature IT shops should concentrate on driving growth in value delivered, working with other internal business organizations and with IT's suppliers to leverage technology to achieve the firms' strategic objectives.

And regardless of IT's maturity, all CIOs should personally focus on measuring, communicating and driving IT efforts based on the business value that IT contributes to the enterprise.

CIOs wanting to break out of the perennial IT-business alignment malaise have to personally take charge of communicating IT's value to their firms' leadership. The cure to this plague requires CIOs to reach beyond just doing a good job of technology management. CIOs must shift IT to a business-value point-of-view--changing how IT operates internally as well as how it interacts across the enterprise and with external partners.

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Bobby Cameron is a vice president and principal analyst at Forrester Research, where he works closely with The CIO Group. For more information and free research from Forrester, please visit www.forrester.com/cioinsight.