uGovernIT

A Practical Approach for IT Governance

IT Budgeting Made Simple!

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Cost and Value

 

In the past, presenting IT budgets was not unlike visiting the Dentist.  We all had to do it, but hated it.  We all tried to compare how well we did in reducing costs.  We used metrics such as cost of IT per employee or percentage of revenues and compared it with our peers.  For example, mid-sized companies spent around $13K per employee on IT and large companies spent about 20% less. These cost centered IT Budgets are a thing of the past.

With the shift towards business driven IT, the single most important metric is the value derived from IT.  We can define three stages of organizational maturity with respect to IT management:

  • Stage 1 – where Cost Centered IT far exceeds Value Centered IT
  • Stage 2 – where Cost Centered IT is about the same as Value Centered IT
  • Stage 3 – where Value Centered IT far exceeds Cost Centered IT

The question naturally that comes is how do we measure value.  In general there are three types of value:

  • Real – actual benefits/value received that can be measured;
  • Algorithmic – where benefits/value is calculated algorithmically; and;
  • Perceived – subjective assessment of benefits/valuation.

While you can spend enormous resources in identifying value, we argue it can be done relatively quickly if you use a combination of the three approaches. uGovernIT offers a multitude of models that can be tailored to meet each industry.    The best part is that the businesses can tailor the models to their specific enterprise without the need for extensive IT effort.

Value centered IT is the practical way to align IT to organizations. uGovernIT provides a 360 degree view of IT to align resources to IT activities that provide most value to the enterprise.  Value centered IT helps bridge the gap between business and IT, and uGovernIT provides an elegant solution to help you automate the process.

Written by Subbu Murthy

August 14, 2016 at 11:08 am

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