Technology has become the common denominator in every key strategy for companies.
Even though Technology is a crucial part of the business strategy, defining, measuring, and communicating the IT value is a challenge for many CIOs.
This post describes value conversations CIOs can craft between IT and the business.
The four types of value conversations
Value conversations depend on facts about:
- Costs (Total Cost of Ownership, including capital and operating expenditures)
- Performance and Risk, Portfolio Investments (Ratios),
- Return on Investment (ROI),
- Cost Structure and
- Data Quality.
CIOs can empower and engage the board focused on four types of value conversations:
1) Cost for Performance: meaning delivering the right performance for the best possible price. CIOs are able to improve cost efficiency and maintain quality.
2) Business-aligned Portfolios: spend resources to get the biggest return possible for the business. IT leaders can focus time and resource on things that drive most value to the company.
3) Investments in Innovation: maximize innovation in terms of cost and ensure value over investment lifetimes. By doing this, executives can better govern and collaborate on project and innovation spending.
4) Enterprise Agility: Improve the speed at which the business – including IT – responds. CIOs create more agile cost structure and accelerate decision-making.
The first two types are related to how the company “run the business” while the last two are linked to components supporting “grow the business”.
How to change the conversation to value?
CIOs are familiar with arguments such as “IT always says no to new requests from the business” or “The IT budget for next year must go down by 3%”, but most of them are experiencing busy agendas and no extra time to demonstrate value for the money spent and promote a business mindset in IT decisions.
Cost Transparency provides metrics to support each of the value conversations.
By using key performance indicators (KPI’s) and setting goals, CIOs can be more effective when answering questions such as “are we making investments in the right places?” and start building a narrative on how technology trends can enhance:
- business value,
- optimise costs,
- align IT strategy with business strategy.
Digitising IT spending supports IT leaders to optimise value and promote the pursuit of better business outcomes.
For example, it may be hard for executives to answer which applications the company should retire because of duplication or under-use, and if the IT investment match where the business is headed.
By using Cost Transparency users can create a portfolio investment comparison across application run and build costs. They can choose to have an overview of the total cost of infrastructure applications and business capabilities, including everything from hardware and software to labour and outside services. In addition, it is possible to divide the spend by volume to calculate unit costs revealing the relative efficiencies among multiple alternatives.
Overall, Cost Transparency makes a huge difference in how IT executes priorities and achieves objectives.
What conversations would you like to change between IT and business?
To learn more about Cost Transparency, visit our website.