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Measuring IT Business Value: Strategies for Financial Justification

This session focuses on enhancing the business value of IT departments by transitioning from a cost center to a strategic partner. Key topics include the measurement of direct contributions to market position and revenues, establishing metrics aligned with corporate goals, and understanding the roles of business managers versus IT professionals. We will also explore quantifiable factors such as productivity gains, reduction of user errors, expense management, and metrics impacting hospital operations, paving the way for effective IT project justification.

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Measuring IT Business Value: Strategies for Financial Justification

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Presentation Transcript

  1. MBA/MIS - 513 Class #3 September 2, 2008 IT Business Value Financial Justification

  2. Tonight’s Agenda • Brief Presentation on International Experience – Thom Porter • Finish up Chapter 2 of Book A • ROI Homework Q&A • Book B – Chapters 1 and 3 • Information Technology Business Value

  3. Book BMeasuring the Business Value of Information Technology Information Technology Business Value (ITBV) Chapter 1

  4. Overall Goals • Move the IT department / process from a ‘cost center’ to a strategic partner to achieve overall goals • Prove ‘business value’

  5. What to measure? • Direct contribution to market position or revenues • Deliverables that support solving customer business needs and challenges • Direct cost savings • Technology investment that advance the industry

  6. Standards in Measurement • Standard metrics developed • Common valuation techniques with other corporate projects • Business value portfolio with values determined by business unit managers

  7. Grow your IT Success Framework Balance the budget needs while moving towards a ‘profit center’ What are the roles for the Bus Mgr versus the IT professional?

  8. Chapter 1 Summary • What are the implications for the Business Unit Manager pertaining to IT? • What are the implications for IT Professionals pertaining to assisting the business?

  9. Chapter 2 (Book B) Methods to determine Business Value

  10. Establish metrics and then monitor Notice these are not IT Metrics

  11. Suggested metrics should be corporate goals • Hospital (from text) • Utilization of beds • # of people for specific lab • Discharges by noon • Diversions • Patient Satisfaction • Staff Satisfaction • Doctor Satisfaction

  12. UNCW Metrics?

  13. Others?

  14. Once you have metricswhat do you do?(as it pertains IT?)

  15. Replacing Human Capital with IT Capital

  16. Productivity (Potential Gains) • Removal of an activity a user performs • Reduction in the time to complete an item • Reduction in user errors • Reduction in time to train new users

  17. Other ‘quantifiable’ items(suggestions, can you use for your project?) • Reduce Expenses • Material Discounts • Scrap Reduction • Hardware / Software Avoidance vs. System End of Life Considerations • Factory Uptime

  18. Other ‘quantifiable’ items(suggestions, can you use for your project?) • Reduce Expenses / Working Capital • Days of Inventory • Days of Receivables

  19. Other ‘quantifiable’ items(suggestions, can you use for your project?) • Increase Revenues • Reduce time to market • Open a new market • Cross Selling • Vendor of Choice

  20. Steps for IT project justification

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