Why IT ROI doesn’t matter?

You can’t miss it. It is all around us. The noise, I mean. “Maximize the value of your IT investments” or “Get the biggest bang for your IT buck” or “how to get IT to do more for less” interspersed with “improve IT ROI” or “better IT ROI”.

Reminds me of a joke in which a home is being burglarized and the lady of house admonishes the man of the house to action: “Don’t just stand there; do something”. And the man’s response? He breaks into a song and dance routine.

Well, IT ROI is the IT community’s song and dance in response to the business’ question: is IT delivering value to the enterprise?

Funny or not, the joke is on us. A lot of time and effort is being expended on something that will not generate the desired results. The irony is that in some cases this focus on IT ROI will produce the exact opposite of what we want to achieve.

Don’t get me wrong. There is nothing wrong with the objective. It is the means that I am questioning. The means to better IT value is not to measure and track IT ROI. To the contrary, IT ROI is one of the most flawed measures of IT value.

ROI is a financial metric designed for a specific purpose. Applying it to an internal investment such as IT is counterproductive.

For the sake of brevity, we will focus on only a few reasons.

IT Value Mapping

IT Value Mapping is a technique that quantifies and visually depicts IT capability of an organization.

It creates diagrams, or value maps, to depict the state of key business and IT components at any given point in time. More importantly, it also depicts the impact of each component’s “state” on business value.

• Current IT Capability – alignment and value – can be assessed by analyzing and comparing these diagrams
• Similarly, an assessment of planned IT decisions can also be made by viewing their impact on IT Capability through these diagrams – without a single dollar being spent on implementation

The technique is based on a unified framework that provides one view of the business:

• Top to bottom: Seamlessly links business and IT capability
• Left to right: links key components of IT capability – from strategy to implementation

It also recognizes the hierarchy of these components and links them - from IT Capability to applications, servers etc.

External events or decisions, all, have an impact on IT value. IT Value Mapping shows us the “what”, “where”, “when” and “how” of this impact.

By making this connection between “decisions” and their impact on “value”, it helps us improve IT ROI.