1 Presenter: Joseph King’ola RegN o. D61/70578/2008

2 What are IT Investments IT Performance Measure & Value Measure Valuation of IT Investments Business Value - David Sward Perspective Balanced Scorecard

3 If you cannot measure IT, you cannot manage IT --- Chairman Emeritus, Intel Corporation.

4 In today’s competitive business climate, organizations are faced with the challenge of scarce resources and IT departments are subjected to increased pressure to prove the business value of IT investments.

5 Choosing and deploying the right solution to maximize an organizational performance, satisfy customers, and make and maintain profits has always been an evasive dream for most organization. In such organizations, IT departments often loses their significance as a major contributing success factor in the business strategic objective because of being predominantly considered a function within organization that is not integral to achieving business objectives.

6  Subsequently, budgets are squeezed year after year as IT departments inevitability drifts towards the “cost centre” perception and not towards being the competitive differentiator where IT has the potential.  This makes it difficult for IT department to enable the long term competitive advantage the CEOs demand. Cont…

7  This is a dangerous notion for any organization wishing to live in this age where technology drives organization.  In order to reverse this trend, IT managers need to identify the cost and value IT brings to the organizations through evaluating the bottom-line impact of IT to reveal its true value and enable allocation of more resources in the most essential areas.

8  Which areas does IT invest in? ◦ IT Projects  Communication Infrastructure  Country wide Network cabling  Deployment of IP Telephony solution  Enterprise Resource Planning Application (ERP)  Server upgrades and Desktop/Laptop refresh  Change of organization technology e.g. moving from Linux to Microsoft

9  Internal IT project becomes a disaster when it exhibit the following combination of symptoms:  Being delivered too late  Serous Cost overruns  Not delivering the benefits  the enterprise’s inability to absorb the changes delivered by new technologies  External Influences from beyond the enterprise that necessitate the changing of IT priorities. Examples include Mergers and Acquisitions, A major shift in the marketplace with respect to competitors’ actions Economic conditions and the need to share services or outsource a business process Push by the corporate headquarters for companies managed from outside Kenya.

10  IT performance measure is based on the following ◦ Help desk support calls ◦ Percentage of uptime of the systems during the week/month/year ◦ Keeping the lights on through business support and availability of systems ◦ Deployment of new desktops ◦ Support of the ERP

11  It’s the business measures against which executives responsible for IT should be assessed against and performance measures developed to ensure that they achieve the value.

12 An organization can and will create a competitive advantage and increase shareholder value not by just deploying information technology, but by deploying the right information technology by linking IT to corporate objectives and focusing all efforts on the requirements of the end user. – David Sward, Measuring Business value of IT. IT Value Cont…

13  There are different perspectives to Business value of IT investment, and there is no defined perspective to follow. This is largely due to the differences in organizations management/operation of the businesses and the strategic goals of organizations.

14  IT Value to an organization is intangible  and more than the financial benefits sought for  by the CEOs.  The value includes:- ◦ The Customer satisfaction ◦ Supplier Satisfaction ◦ Internal Customers – Users appreciation ◦ Shareholder Value ◦ Employee benefits

15 IT organization must move from being techno-centric to user-centric. This will cause a shift of IT being perceived as a cost centre to becoming a strategic partner that contributes to organizational competitive advantage for the organization. IT Value cont…

16 Business Objectives MEASURED BUSINESS VALUE User Requirements IT Capabilities USER EXPERIENC E DESIGN Driving greater Business Value David Sward Perspective

17  User Experience Design - brings together ◦ the business objectives, ◦ User requirements ◦ and IT capabilities, This setup positions organization to leverage on these three inputs to significantly large amount of measured business value. IT departments that successfully bridge the gap between end-users and business objectives creates a competitive advantage with IT investments that impacts the organizations bottom-line.

18 Business value is the benefit for the business unit and the organization as a whole, represented in monetary terms, as a result of IT solutions or services as outlined below ◦ Direct Contribution to the organizations market position or increased revenue ◦ Deliverables and results that support solving customer business needs and challenges ◦ Customer cost saving or financial benefits

19 Examples of Organizations embracing IT for organizational growth are ◦ Mobile Companies like Safaricom and Zain  Safaricom growth has been attributed to the integration of IT into their business processes  The company has a CIO – Chief Information Officer that is able to link the business objective to IT solutions ◦ Airline Industry - Kenya Airways ◦ Oil Companies – Chevron procurement and Supply chain of oil Products

20 The initial investment on IT for these organization was huge in order for them to derive the value of IT the investment. Organizations recognition of IT people as Business People too and integrating IT values into the organizations score card and creating an IT seat in the organizations board members and strategic planners.

21  The value of IT enables the business to operate, grow successfully and create value as demonstrated by the local companies in Kenya.  However, the contribution of IT to the success of the enterprise is frequently implicitly assumed by proponents of technology rather than explicitly stated and, therefore, is difficult to justify and even harder to evaluate the value of IT investment. An Example is Government corporation where support of IT investment initiatives are seen as a way of cutting jobs and benefit for a few individuals.

22  Link IT internal activities to business value,  Personally position IT value to the organization  Add business value to IT’s work with other organizations  Have IT inputs measured in the organizations scorecard.

23 The balanced scorecard (BSC) is a strategic performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. Through focus not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests. Balanced Scorecard

24 Organizations that have embraced a good Valuation system for IT investments has integrated the IT departments with the business and hence realizing the benefits of IT investments. IT people are Business People too and IT enables the business chain –CIO Chevron Corporation

25 Thank you