 |
|
|
|
|
 |
 |
Measuring and Communicating IT Value Through Multi-Dimensional Metrics of InterestOver the last 40 years, IT spending has become the largest capital expenditure in Corporate America. Yet despite the magnitude of IT investment activity and the emergence of best practice measurement systems such as Six Sigma and Balanced Scorecard in other corporate functions, less than 10 percent of organizations currently employ meaningful measurement of their IT investment effectiveness. The frontier mentality of IT spending has resulted in an entropic environment where the average project has a 60 percent success rate. IT investment might be better characterized as a game of chance rather than a best practice. But the frontier days of IT investment management are quickly coming to an end. The bursting of the Internet bubble and heightened corporate governance standards, such as Sarbanes-Oxley, have created a permanent shift in how Corporate America’s largest expenditure is being treated. Leading CEO’s have moved beyond just asking how much IT investments cost; now they‘re insisting on multi-dimensional ROI metrics to replace the IT black box with enterprise-wide IT value measurement systems that ensure alignment and drive accountability in the organization and across its IT vendors. Measuring ValueFor an IT value measurement system to be effective, it must measure tangible and intangible strategic, financial, and operational dimensions of costs and benefits across all business processes and functions. The holistic nature of such measurement systems allows organizations to produce risk-adjusted ROI scorecards for IT investments that serve as a very effective indicator for purposes of prioritizing projects and establishing clear accountability for results. In order to maximize value from IT investments, organizations need to establish an enterprise measurement framework with a complete, multi-dimensional view that includes:
Meaningful metrics measure the right things. Relevant metrics must go a step further and measure success relative to the goals of each stakeholder (Board, CEO, CFO, etc.) and communicate results in a form that is appropriate to the stakeholder. Metrics of InterestMetrics of Interest are initially determined in organizational-level terms:
Once meaningful organizational-level Metrics of Interest have been identified, they are localized to enable communication in relevant terms within and across organizational-levels and functions. This ensures that IT value can be measured and communicated in the language of various stakeholders. Using Metrics of Interest to Drive Alignment and Competitive AdvantageThe use of a multi-dimensional IT value measurement system and appropriate Metrics of Interest provides organizations with the opportunity to drive rapid change and meaningful alignment by transforming IT investment management from a game of chance into an effective management tool. More importantly, the establishment of an IT value measurement system with appropriate Metrics of Interest arms organizations with an effective way to rapidly respond to changes in the business environment, positioning them well ahead of their competition. Quantum Leap ResultsThe quality of IT spending has a much greater impact on the ROI than the magnitude of IT spending.
Source: Alinean Proprietary Research Findings 2003. The leading companies in Alinean’s ROI™ index that are working smarter, spend less, yet are able to create more value relative to their peers. Leading companies are outperforming their peers by multiples rather than percentage points. CEO’s and boards must also consider the cost of ‘not’ implementing a multi-dimensional IT value measurement system. Skeptics that continue to manage their IT investments as a “game of chance” run the risk of being left behind (or ultimately acquired) by competitors that embrace multi-dimensional IT investment management. The FutureAs organizations harness the power of IT value measurement systems with appropriate Metrics of Interest, their focus has begun to evolve beyond internal alignment and accountability. This evolution is expanding to address the issue of vendor accountability and in some cases, extends to ROI service level agreements with solution providers that include ROI-based incentives and penalties for above-plan and below-plan ROI performance. ConclusionThe introduction of an effective multi-dimensional IT value measurement system and appropriate Metrics of Interest makes it possible to produce Six Sigma level results in a very short period. This perfect storm offers Corporate America a chance to turn the trillion dollar challenge into a trillion dollar opportunity. By properly measuring (and consequently managing) IT investment, 90 percent of Corporate America is poised to unleash the biggest transformational value engine in corporate history.
Upgrading Exchange Can Deliver Significant ROIOne of the core utilities IT provides to an organization is messaging services, including e-mail, calendaring, task management and collaboration. This utility is surprisingly expensive, especially if the organization runs prior-generation e-mail platforms. A typical Microsoft Exchange 5.5 solution has direct costs of more than $350 per user, per year, including hardware, software, IT operations, support and administration, and overhead. Older versions of same generation e-mail solutions like IBM Lotus Notes are similarly expensive. Newer messaging solutions have important productivity enhancements, and the high total cost of ownership (TCO) of these older generation e-mail solutions offers a significant savings opportunity. As a result, many companies are upgrading their e-mail infrastructure. The latest platforms, such as Microsoft’s Exchange 2003, are expected to grow from 10 percent of the installed base in 2003 to more than 35 percent in 2004. Microsoft Exchange 5.5 TCO - An Opportunity for SavingsAlinean modeled the current TCO for typical Microsoft Exchange 5.5 environments between 100 and 500 users, and found that administration and support costs surpass $299 per user annually for a typical 100 - 500 person installation, and requires between one and two full time equivalents (FTEs) to administer and support the environment. In fact, 90 percent of direct costs for Microsoft Exchange 5.5 are for administration and support labor, placing a significant ongoing burden on IT operations and support. When service levels are considered in the TCO equation for Microsoft Exchange 5.5, the costs increase dramatically. Most Microsoft Exchange 5.5 installations achieve, at best, only 98.5 percent availability. Each messaging downtime hour in a 500-person organization amounts to $8,600 in real productivity losses – costing more than $400,000 annually. In a 100-person organization, the expense exceeds $1,700 in productivity losses per messaging downtime hour. With more than 40 hours of messaging downtime annually in a typical Microsoft Exchange 5.5 installation, downtime losses can easily surpass $800 per user, per year.
The TCO for a typical 100 - 500 user Microsoft Exchange 5.5 enterprise is more than $1,100 per user, per year.
|
|
Migration from Microsoft Exchange 5.5 to Exchange 2000 |
Initial Investment |
|
Hardware and Software |
$ 75,000 |
|
Internal IT and Support Labor |
$ 15,000 |
|
Training |
$ 3,000 |
|
Professional Services |
$ 30,000 |
|
Asset Write-down |
$ 5,000 |
|
Total |
$ 128,000 |
Migration to
Microsoft Exchange 2000 typically requires an initial investment
of more
than $100,000 for a 500-user enterprise.
The migration or upgrade from Microsoft Exchange 5.5 to Microsoft Exchange 2003 is compelling from a business perspective. While this upgrade can be quite daunting to a resource-constrained IT organization, the bottom-line benefits justify the costs: a typical 500-user organization can achieve an ROI of more than 300 percent, and an expected payback post-deployment of four months. As employees require richer messaging capabilities, especially remote and wireless access, shared scheduling and calendaring, task management and global address lists, newer generation messaging software delivers an impressive ROI and frees up valuable technology and staff resources.
In a 5,000 e-mail user organization, each user spends 10 minutes/day dealing with spam, at a yearly cost of $4.1 million. With an anti-spam solution, each user can save over 5 minutes/day alleviating spam review and delete, a productivity savings of $783,000.
Source: IDC
