A recent article in Computerworld is titled IT investments deliver profits, study finds. I guess we shouldn’t be surprised by that, nobody would invest in IT if they didn’t get a return for their investment. The article reports the findings of research published in MIS quarterly which found that:
- The effect of IT investments on sales and profitability is higher than that of other discretionary investments, such as advertising and R&D
- Most of IT’s impact on profitability is accounted for by IT-enabled revenue growth
- A $1 increase in IT expenditures per employee was associated with a $12.22 increase in sales per employee
- There is no evidence for the effect of IT on profitability through operating cost reduction
The authors of this research also wrote a summary of their paper in The Impact of IT Investments on Profits, in MITSloan Management Review.
I have recently seen a number of other articles about how important it is for IT to invest in technology of one sort or another, and how this will deliver value for the business, for example IT Spending: Innovation Talk Vs. Survival Walk in Information Week and In the cloud era, let's start calling IT what it is: 'Innovation Team' on ZDNet.
Everyone seems to agree that we need to invest in IT to grow the business, but I have seen very little advice on how to identify the right investments to make. This is where IT service management can play a part. Processes such as strategy management, service portfolio management and demand management can help you to identify and prioritize the best investment opportunities, but it is really important to approach these the right way.
Here are some practical steps you can follow to carry out a review of your service portfolio:
1. Ensure you have a good understanding of your overall strategy
You must have a clear understanding of what you are trying to achieve as a service provider before you can analyse your service portfolio. Make sure you know
This governance work is an important foundation to everything else that you do as a service provider.
2. Understand customer outcomes
Listen to your customers. Forget about IT services and talk to your customers about their business. For each customer, make sure you understand:
Create a list of all the important customer outcomes, and then ask:
I often use a simple 1 to 5 rating for each of these three factors, to provide a simple way of comparing and analysing the results of this work.
3. Review existing services
Create a complete list of your existing IT services. If you already have a service catalogue then this step will be easy, otherwise you will have to do some discovery work to identify what services are being delivered.
Create a cross reference between existing services and customer outcomes. I usually use a spreadsheet for this, with outcomes across the columns and services down the rows.
When you can see the relationships between existing services and customer outcomes, combined with information about the criticality of each outcome and how well it is being met, you will find it very easy to identify:
4. Prioritize portfolio changes
You should now review all of the opportunities you have identified in terms of:
This will result in a prioritized list of potential changes to your service portfolio, based on risks, costs and benefits.
5. Document the service portfolio
Document the current and future state of the service portfolio, including information about the outcomes supported by each service. Ideally this should be a visual representation that is easy to share with other people.
6. Next steps
Communicate the portfolio to your stakeholders, identify business sponsors for the changes that are needed and create business cases to support the investment required.
If you want more ideas about how to start thinking strategically, then read some of my other blogs:
- Using strategic service management to help create value for your customers
- IT strategy: 4 things you can learn from the U.S. government (yes, the U.S. government)
- IT Strategy: 3 more things you can learn from the U.S. Government
- 3 Steps an IT manager should take to earn their seat on the board
- Prioritizing time to get started on strategic planning
- Don’t mistake continual service improvement for a mature IT strategy
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