Information Technology and Business Management
In the contemporary world, there is growing need for CIOs to develop effective ways of measuring and monitoring communication performance. This is because information and communication technology has taken a central role in business environment. As well, various IT metrics such as calculating IT spending as a proportion of revenue focus on reducing the cost rather than focusing on the business value of investing on technology. The traditional metrics as well fails to put more emphasis building business innovation or improve business processes. When Mitra et al. (2011), interviewed CIOs from 23 organizations, he came up with a framework that would help business leaders to improve the value of IT application to overall business organizations.
When Mitra et al observed that CIOs have difficulties measuring and reporting the value that IT brings to organizations; he had carefully analyzed the traditional IT metrics and seen their weaknesses. He observes that the IT adds more value to the overall business than what traditional metrics depict. It becomes a challenge for business leaders to measure and effectively communicate other values that IT brings. On top of reducing the cost of doing business, IT enables business innovativeness and improves other business processes, either directly or indirectly. The next challenge arises when the business leaders attempt to draw a relationship between the business value of IT and overall financial performance especially for the highly profitable business entities. The author then proceeds to exonerate on the importance of having metrics in place citing that it is impossible to measure what does not exist. Metrics play an important role in motivating the employees and changing behaviors to improve business performance. This is probably the reason why over the years, organizations have come up with various metrics, methodologies and frameworks to measure performance. However, it is unfortunate that some of these frameworks are highly complex and rigid, calling for the need to develop simpler and more flexible ones.
One of the most fundamental issues that Mitra et al (2011) addresses is the multi-dimensional approach that can be used to measure IT performance. These approaches include but are not limited to network performance, extend of usage, business processes efficiency, consumer satisfaction and project’s strategic values. The dimensions that the author proposes are comprehensive in that they vary in their meaningfulness, specificity and influence. However, the challenge arises when aligning these dimensions in a manner that facilitates effective decision making. The dimensions are further complicated by the fact that different stakeholders have different purposes as far as planning, communication and reporting of performance is concerned. Though IT organization’s performance and value are used interchangeably, IT metrics can not always be used to measure value. Other IT related aspects that can have little impact on value on-budget and on-time deliveries of projects. However, the author notes that these aspects can provide measurable values only if they improve the business service delivery in significant ways. To elaborate this, he argues that an in-time project can create more value than a project that exceeds its deadline but only when cancellation and other resultant features have significantly severe impact to the business.
In fact, the main idea that has been discussed in this article is that there are distinct issues within IT and performance that can be quantified and others that are difficult to communicate. For these, most of the metrics of the IT in business can be measured in performance as opposed to value. Nonetheless, most business leaders find themselves reporting IT specific issues since the traditional metrics are easily benchmarked and reported. From the analysis of definitions that the author gathered from the CIOs and after incorporating the traditional metrics, he came to conclude that the IT value is quantified by performance metrics only on dimensions that the stakeholders find important. To shed more light to his analysis, Mitra et al (2011) noted that his definition is relevant in the following circumstances;-
1- The respective metric must be having some significant to the stakeholders
2- The metric must not communicate value
3- The perception of value change must go hand in hand with changes of stakeholder’s requirements
4- In the case where the measure is important, the stakeholders should not see any value in improving it
5- Business executives are only interested in value that accrues from performance changes as opposed to performance from the prevailing IT operations
Mitra’s analogy of value, IT, performance and metric is comprehensive because argues about the link and the relationship of the elements from all the dimensions. According to him, some values of IT operations are only perceived, but the overall business performance can be measured. As well, he proceeds to emphasize that the stakeholder’s perception is important to consider while determining which IT metrics to incorporate during performance analysis. Generally, an IT related metric is not relevant to the performance analysis if the CIOs can not convince the stakeholders that it would add value to the overall business operations. The author’s analysis adds a valuable ingredient by shedding more light to the IT business operations, value and performance. It makes it clear that value is in the eyes of the stakeholders and for an IT metric to be effectively communicated, it should be done so in a language that is relevant to the stakeholders. For these reasons, the IT leaders must seek enhanced understanding of the performance measures that matter to the stakeholders. In addition, they should come up with initiatives that will boost those measures.
However, during the analysis of how IT contribution is measure in the businesses, the author failed to acknowledge the roles of the machine used in IT. There is the real value of the machine itself in addition to the value of maintenance and the energy used by the user. The authors analysis emphasized on the benefits that accrues from the user. For IT to create value to the business there should be a balance between the price of the machine and the performance implications it brings to the business. In real life business practice, any metric used to measure value and performance must run the business, grow the business and transform the business. While attempting to improve performance, businesses should not solely be concerned with maximizing revenue or profits. Instead, the most important areas of concern are cost reduction, risk reduction and improved price to performance ratio. In other words, in order to show value, businesses should strive to demonstrate efficiency and focus to the stakeholders priorities. In this case, the most important stakeholder to the business is the customer. It is undisputable fact that for most successful businesses, investing in IT is instrumental to achieving good performance.
Mitra et al., “Measuring IT Performance and Communicating Value”,MIS Quarterly Executive, 2011