Measuring IT Value
The progression of how enterprises measure information technologies' (IT) performance has been a progression from inward-centric metrics of performance to advanced analytics that capture contributions to strategic objectives. Chief Information Officers (CIOs) often measure their performance by cost reduction and system consolidation while Chief Executive Officers (CEOs) measure IT by the contribution to new business growth (Trkman, McCormack, de Oliveira, Ladeira, 2010). There are many strategic frameworks that enterprises use to map the contribution of IT, with the Porter value chain being the most prevalent (Porter, 1986). The intent of this analysis is to evaluate the most critical metrics that an enterprise can use to measure the effectiveness and efficiency of IT. These metrics also fuel the methods used to measure toe economic value of an IT department to a given enterprise as well. This aspect of measuring IT value will be defined in addition to evaluating the models used for measuring the economic vale of an IT department to a company. Finally there is a brief discussion of whether or not traditional financial ratios and measurements must be applied to measuring the value of IT or not. In reality these metrics are often only showing a part of the Return on Investment (ROI) of any IT investment. To get the complete picture of performance, enterprises needs to align their IT efficiency and effectiveness measures to specific strategy performance, and the Porter value chain is ideal for defining these interrelationships (Porter, 1986). Financial metrics only provide part of the insight into the ROI of IT needed.
Frameworks for Measuring IT Value
The frameworks that have been traditionally used to measure economic value of IT are no longer flexible enough to deal with the level of agility and complexity that enterprises are dealing with daily. These traditional frameworks including the Balanced Scorecard, Capability Maturity Framework, IT Costs vs. Benefits Analysis, and many others have been created primarily to measure IT's value in purely financial terms without looking at its strategic value (McShea,...
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