High Impact IT: Realizing the Business Value of IT investments
If you ever worked for an early-stage company you know the pressure to constantly demonstrate value your technology and your team can deliver to your investors. IT is not different in this regard. When you develop your annual IT budget, your CEO and Board will be reading it skeptically and will ask the key questions: What is IT doing for us; why should we continue investing in a department that offers functions that are commoditized and can be sourced elsewhere, i.e., Everything as a Service? Similarly, all capital investments in major IT projects need to have well-thought-out business cases and a team that can deliver results. As venture capitalists evaluate companies on their principals, capital investment committees want to be convinced that the CIO and the project sponsor are in alignment with each other, both want this project, and both are willing to contribute their resources to execute it. If the project sponsor is not convinced or is unwilling to contribute his or her resources for requirement gathering and testing, success and funding may be at risk.
One of the challenges when demonstrating value of an IT investment is that not the right people are at the table when defining what added value means. Having a great technology solution and a winning team are necessary for project success but don’t guarantee value creation. For example, Electronic Health Records (EHR) implementation projects often fail because of lack of user engagement early in the project. Physician users are very powerful in healthcare organizations and their priorities may differ from that of the project sponsor. While the project sponsor may want uniformity, well-defined workflows, efficiency, collection of performance metrics, and analytics; physicians may prefer usability, system configuration that automates their existing workflows, and easier and faster data entry. Healthcare IT departments recognized this issue and established the role of the Chief Medical Information Officer (CMIO), who is typically a practicing physician in the organization. The CMIO needs to be engaged early in all clinical system implementation projects, otherwise, while the system will be deployed, users may resist using it. Without early user engagement, limited business value is realized. Other environments may not have a similar role. In this case, the CIO and the project sponsor need to assure that the users are represented by an opinion leader who may co-sponsor the project.
Having a great technology solution and a winning team are necessary for project success but don’t guarantee value creation
Another challenge is that the investment and the value are separated in space and time; therefore, a cause-and-effect relationship cannot be easily identified. Investments at the basic infrastructure level, with no direct connections to business functions, are often perceived as expensive and low value. For example, implementation of a faster network connection may cause limited immediate service improvement for most users. However, by the time of deploying a data traffic-intensive, on cloud application (e.g., Office 365 email), the investment in infrastructure may be forgotten, irrespective of it being a prerequisite for good user experience with Office 365.
Many CIOs favor to outsource commoditized IT functions. This allows them to focus on differentiating IT functions that are specific for the industry or the company. The CIO and IT can add more value to these differentiating functions than spending too many resources on basic infrastructure needs (e.g., maintaining email servers or administering business productivity tools.) Moreover, return on investment in the differentiating factors are realized faster and the link between return and investment can be more readily established. Some commoditized functions (e.g., email) may be taken granted and are noticed only when they are missing. Therefore, the service is not highly valued by the organization. However, any interruption of these core services can easily undermine the reputation of IT. These factors all favor migration of emails and basic business productivity tools to Office 365. Moreover, based on the Office 365 platform and taking advantage of the economies of scale, Microsoft offers other cloud-based services that may be not feasible for some companies to offer internally (e.g., SharePoint).
In spite of all the benefits of Office 365, each company needs to do their own due diligence whether the service provides the value what they anticipate. This is particularly true for companies that have well-established, stable Microsoft Exchange environments on premises and the expertise to administer it. Buying into a cloud platform always comes with the risk of less control over configuration, customer support, and future price increases. While Office 365 includes services (e.g., smart host) that the company needs to source from third party vendors otherwise, other third-party services may need to be added after migration to Office 365. For example, in some regulated environments, OneDrive may not be compliant, because a user can irreversibly delete files from his recycle bin. Therefore, the organization cannot solely rely on Microsoft to back up OneDrive but needs to implement another backup solution on premises or at a third party, at an extra cost.
The cost of administering Office 365 is often underestimated. You will still need to allocate internal resources to manage email accounts, Active Directory, and add-on licenses (e.g., Visio), which constitutes a major part of administering your emails and Microsoft Office, irrespective of whether they are offered on premises or on the cloud.
Nonprofit organizations that are able to subscribe for Office 365 at charity pricing today face another risk. Microsoft may single-handedly change eligibility criteria for charity pricing in the future. If it happens, you may lose your charity pricing and your Office 365 will no longer be affordable for your organization.
Realizing business value from IT investment is more a marathon than a sprint. While value is often estimated based on individual projects, what really matters the most is what value is realized when executing an entire project portfolio over a longer time (i.e., 3+ years). If the organization has a good overall strategy, a clear technology roadmap, and the projects are aligned with the strategy and support each other, the investment will be translated into real business value.