Cost is a key measure of performance, but cost reduction will only take you so far. There comes a point when the delivery of a service is optimised, and few real efficiency gains left to be made. How, then, does the IT organisation either measure productivity or set targets for improvement? Efficiency is still an excellent tool, but needs to be taken to a higher level. Let’s imagine that an organisation has grown through acquisition, and now runs three financial systems. Each system may well be running efficiently and cost-effectively by itself, but in the longer term is it efficient in the wider scale of the business to run three systems requiring three lots of licensing, maintenance, hosting, support staff and skills ““ not to mention the additional workload of consolidation for reporting at the corporate / group level? Closely related is the concept of value: does the IT organisation deliver services to meet the business ICT needs at a cost that represents value? In the imaginary example the cost of a single system won’t be one third of the cost of running three, but consolidation may well bring the cost down to seventy or eighty percent. On the other hand, the three business units may have such diverse requirements that the maintenance of separate systems is actually more cost-effective than a major project to extend/customise an enterprise scale solution to meet all of the use cases. Reviewing the portfolio of applications and services delivered to the business on a regular cycle will help the IT organisation to demonstrate to the business not just how much is being spent ““ but where it’s being spent and why. Measuring value to the business ““ and reporting on it in terms the business can understand ““ is much more subjective and complex than detailed measures of service or product delivery, but in the boardroom IT has to justify it’s existence in terms of return on investment or value added to the business just like any other functional area. How does this match with your experience? Is there another dimension to explore? Join the discussion on our LinkedIN group ( http://lnkd.in/jxjJHp ) to explore the topic in more detail.
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In a post for the PM Perspectives Blog, Elizabeth Harrin considers a theory being discussed …