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IT Productivity what counts in a downturn

November 18, 2008

I believe that the higher contributions over longer periods of time are probably due to the compounding effect of information technology investments. Over a period of years, new IT investments can take advantage of a range of existing solutions, thus minimizing cost of introduction and time to ROI. Not only do they reveal a positive impact of IT spending on longer-term productivity, but the results also indicate that IT is significantly more productive when combined with organizational capital, such as when IT is combined with a work force that is both IT literate and equipped with significant business knowledge and acumen. A corollary to the findings of is that large and time-consuming inputs are required for IT implementations, and these outputs are often omitted from return-on-investment (ROI) calculations. These costs are important to capture when preparing ROI analysis for new solution development and introduction.

Changing Measures of Success

Today, IT organizations are being asked to deliver both substantial cost savings and increasing business valuea difficult challenge, especially when coupled with rapidly increasing IT workloads and business pressure for IT-enabled innovation. In the past, IT organizations gauged success primarily in terms of their services; that is, they viewed higher availability and compliance with service-level agreements as key measures of success. Today, IT organizations are being driven to expand their success metrics to include those related to improving the bottom line. For example, they are reducing time-to-market for new products, increasing revenue, avoiding or minimizing factory capital purchases, and measuring improvements in employee productivity.

The title CIO/CTO is increasingly being interpreted by some CEOs as meaning Chief Innovation Officer. This is because IT is often seen as a key enabler for business innovation through enhancing and creating new products and services, transforming a business, and perhaps changing the landscape of an industry. However, as one CIO joked, CIO can also stand for Career Is Over if this mandate is not executed well. Leading-edge IT organizations are now working to develop IT solutions that systematically manage and harness innovation in business organizations with the promise of much higher yields from innovation-related activities.

However, along with the drive for innovation, CIOs and IT personnel are faced with another challenge: an increasing workload. “The IT function is the most thankless, cumbersome function faced by Fortune 2000 companies, where your work only gets noticed when things break, you’re viewed as a major source of expenses, and your workload has tripled in the past year”

When the opportunity to innovate is pitted against an increasingly exhausting workload, it is no wonder that CIOs and IT employees are under significant stress. In an uncertain business environment, the CIO, the IT staff, and business managers need to manage IT proactively to avoid their own burnout and failure. Limited resources require more precise allocation processes, and difficult times demand that the business value of IT is optimized.

The challenge that CIOs face is to find the balance point when weighing both investments in innovation and business value against increased workload and attempts to reduce cost. Applying standard metrics and methods for forecasting and measuring actual business value delivered will help. The introduction of such practices will both initially identify previously unrecognized payoffs for IT spending and lay the foundation for delivering increased IT business value.

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