The need for business driven IT performance indicators.

IT like any other business function is using many (key) performance indicators to measure it’s working effectiveness and delivered results. Historically given, many of used performance indicators were of technical nature, perfectly readable and understandable by IT … but far less so by the business.  Just to name a few: average uptime (of whatever system), Incident resolution within Service level agreement, Number of incidents / escalations. While this indicators makes perfect sense for IT department and steering IT operations, one question emerged repeatedly during C=level meetings: “How does this help the business?”

Based on this premise – a new set of IT performance indicators arose, indicators that were designed for business people to understand them. One of such sets is well explained in ITIL v3 as ITIL KPIs Business Relationship Management – Number of Customer Complaints, Number of Customer Satisfaction Surveys, Customer Satisfaction per Service  … .

Inside the IT community many discussions tried to define a set of performance indicators that would bring IT closer to business. Looking at them from IT perspective, they made less sense in from the technical point of view, but once again, the potential of being understood by business (line of business managers) increased. Again a few examples: IT Cost/Revenue ,Availability, Rate of Application Change, Risk, Employee Satisfaction by Kevin Parker.

Taking the approach a step further, IT needs to answer the already mentioned question:  “How does this help the business?” If IT department is announce performance indicators and present them to business, then those numbers must be: 1. Understandable to non-tech personnel, 2. Be related to actual business performance and 3. Express IT contribution to business performance.  While there are some indicators that comply with point one and two – like for example IT Cost / Total revenue, this indicator fails to comply with the point three – meaning to show how IT contributed to business performance.

IT contribution to business is another much discussed point among IT executives. Several discussions are presented here: Creating a Powerful IT Contribution Statement by Dave Aron, CEO of Unisys Provides Four Tips to Align IT And Business Teams by Jacob Morgan, Engaging IT to business by Miroslav Jasso (myself).  If IT can come with measurable criteria how it directly helped to increase company’s income / profit / margin, then a performance indicator can be established that will be understood by business guys, be related with company’s financial performance and show a direct impact IT has on this performance and look like:

IT value to business = measurable direct monetary IT contribution / total income|profit|margin.

Advertisements

3 Comments on “The need for business driven IT performance indicators.”

  1. sleicest says:

    Perhaps the way to look at this is to identify which business processes IT is used in. Then measure how transaction volumes are increased, errors are reduced and service quality is improved for the business process, using IT, instead of human labour freeing it up for what it does best (higher value design work). See the IT activity in the context of systems supporting business processes. Obviously IT does more, and can take the entire business in new directions, (be a strategic enabler) too. Look to the business case and then measure revenue improvement and cost savings thanks to greater use of IT.

  2. David Statham says:

    Some form of Dashboard / Scorecard is essential but they always give a historic view of what either did perform well or not. All valuable data especially trends, but….real time analytics and deep understanding of how Applications and Infrastructure support the business is key. xy application went down for 2 hrs yesterday – how did it impact the business ? What did it stop the business doing and how do we prevent a future similar Incident. The impact on say Amazon at this time of year would be greater than where IT is incidental to but not critical to the business, e.g. Payroll apps. Its all about Information rather than Data

  3. […] Functionality and stability of IT environment in one’s company sounds most easy, as both conditions could be measures and quantified – using appropriate KPIs. Unfortunately, there is no common standard for IT related KPIs, there are many different KPIs used across industries and areas. Historically given, many of used KPIs were of technical nature, perfectly readable and understandable by IT … but far less so by the business.  Just to name a few: average uptime (of whatever system), Incident resolution within Service level agreement, Number of incidents / escalations. The CIO needs to choose a set of performance indicators that will both reflect the state of IT infrastructure and services AND be readable by non-IT individuals. […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s