Finding value in IT

A new governance framework aims to help management evaluate whether an IT investment contributes to the organization's strategic objectives.
Written by Georges Ataya, Contributor

Few organizations could continue to operate without their IT infrastructure. Yet, while IT clearly adds value to the business, many executives question whether the value gained is on par with the level of investment.

A 2004 survey conducted by IBM with Fortune 1000 CIOs revealed that 40 percent of all IT spending brought no return to the organization.

Clearly, measuring, maximizing and monitoring the financial returns from IT investments are essential components of a well-run organization. But this is a difficult, often murky process that has lacked a set of generally accepted guidelines.

Recognizing the increasing demand for these guidelines from boards and executive management, the IT Governance Institute (ITGI) developed a governance framework called Val IT. This framework is supported by a globally developed set of guiding principles and key processes.

Val IT is based on Control Objectives for Information and related Technology (COBIT), the international framework for good IT governance and control, developed by ITGI more than 10 years ago and recently updated and released as COBIT 4.0.

Available as a complimentary download at the ITGI Web site, Val IT helps business leaders fulfill their responsibilities related to IT-enabled investments and maximize the return on investment (ROI) of their IT. It has relevance for all management levels across business and IT, from the CEO to those directly involved in the selection, procurement, development, implementation or benefits realization processes.

Specifically, Val IT focuses on two primary questions:

Are we doing the right things?
This question focuses on the organization's investment strategy to determine if the investment is in line with the organization's vision and consistent with its business principles. It also evaluates whether the investment contributes to the organization's strategic objectives and whether it provides optimal value at an affordable cost and at an acceptable level of risk.

Are we getting the benefits?
This question examines whether value is being realized. It ensures that the organization has a clear and shared understanding of the expected benefits and that there is clear accountability for realizing the benefits. It also determines whether relevant metrics are in place and if the organization has an effective benefits realization process.

Val IT is based on seven principles:

  1. IT will be managed as a portfolio of investments
  2. IT-enabled investments will include the full scope of activities that are required to achieve business value
  3. IT-enabled investments will be managed through their full economic life cycle
  4. Value delivery practices will recognize that there are different categories of investments that will be evaluated and managed differently
  5. Value delivery practices will define and monitor key metrics and will respond quickly to any changes or deviations
  6. Value delivery practices will engage all stakeholders and assign appropriate accountability for the delivery of capabilities and the realization of business benefits
  7. Value delivery practices will be continually monitored, evaluated and improved

Three processes--value governance, portfolio management and investment management--conform to those principles and are further defined by 40 key management practices.

By applying the principles and processes contained in Val IT, organizations can:

  • Increase the understanding and transparency of cost, risks and benefits, resulting in better-informed management decisions
  • Increase the probability of selecting investments with the potential to generate the highest return
  • Increase the likelihood of executing the selected investments such that they achieve or exceed their potential return
  • Reduce costs by not doing things they should not be doing and taking early corrective action on, or terminating, investments that are not delivering to their potential
  • Reduce the risk of failure, especially high-impact failure
  • Reduce the surprises relative to IT costs and delivery, thus increasing business value, reducing unnecessary costs and increasing the overall level of confidence in IT

Value does not come from technology itself--it comes from how it is managed. With the right governance and management processes, and with full commitment and engagement from all management levels, IT-enabled business investments can yield tremendous value.

Georges Ataya, CISA, CISM, CISSP, is a professor at Solvay Business School in Brussels, Belgium, in charge of the executive master in IT governance. He is president of the ISACA Belux Chapter and is managing partner of ICT Control SA, a management consulting firm that specializes in IT governance.

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