How CIOs Measure and Report IT Value
Digital transformation has forever changed the role of the chief information officer, and the role continues to evolve. As a business leader, the CIO must not only collaborate with other departments but also prove the business value the IT department provides. CIOs have changed the way they’re reporting value because boards and CEOs want to understand the dollar value of what they’re providing, not how many applications were written, for example. While traditional technology-centric metrics remain valuable for IT operations, in the bigger picture, business value is where it’s at. CIOs are starting to realize that they have to act and operate more as businesspeople and less just as technologists, says Eric Johnson, CIO at digital operations management company PagerDuty. He adds that he has teams that are managing metrics and measuring the value of their individual functions, all the way down to the individual contributor. “But as a CIO, my first question is always, ‘What impact is this specific line item going to make?’” Reporting is done quarterly, in tandem with business partners, with each team ranking the impact of their projects. Johnson says that there’s a lot of close coordination with the business about what’s important for them. “Why should [those projects] be prioritized over other things?” he asks. He adds that it’s important to make sure that you have a good operating cadence and operating model around planning, so you can have the highest impact that’s most important to the business. “Real planning [also ensures] that you don’t end up working on urgent things that are unimportant, which is too often the case.” Related:Organizations Every CIO Should Consider Joining Eric Johnson, PagerDuty Joe Locandro, global CIO, enterprise software support provider Rimini Street, made a point of measuring business value in 2008. He even developed some frameworks that would help him measure it. “There are three main drivers to value. The first is reducing risk — technical debt, systems outages, and cyber risks. The second category is about operational efficiency and lowering the cost to serve, which requires data and analytics,” says Locandro. “The third one is innovation, [such as] using technology to create value by creating new customer journeys or experiences through mobile apps, B2B customer portals, and lately AI and agentic workflows, which really is a paradigm shift in the way enterprises [and] customers interact in the ecosystem.” He adds that it’s true innovation, because it creates new market segments with products that weren’t there in the past. Related:Former CISO of Costco, Disney, and Now Exec at Axonius Talks CISO Strategies KPIs and Monitoring Are Key Though boards and CEOs want to understand the monetary value IT drives, not all value is quantifiable, and not all value derived is cash based. That’s why Rimini Street’s Locandro measures both cash and non-cash benefits. According to Locandro, value measurement makes the business more disciplined when thinking about the opportunity cost of capital. “You can spend $10 million more on marketing, supply chain optimization, or an IT project, because there’s finite capital in the organization. When you have a CIO with a seat at the executive table who can argue that for every dollar he receives the business will get $1.30 or $1.80 in return, other leaders such as from marketing or production must do the same thing [when competing for budget].” Early on, Locandro mapped metrics over quarters and years, so he could show the cost/benefit ratio using a Boston grid. One axis was value (low to high). The other was strategic (upper right-hand corner) and compliance (lower right-hand corner). Locandro says that when you map your portfolio over one, three, or five years, you can see if the investment is moving up the quadrants or still stuck in that same quadrant. It gives an indication of its maturity or the view of it in that organization. “Every company I’ve gone into, when I first get there, I look at the roadmaps [and] reports. It’s all about activity, how busy they are, but what’s the outcome? Changing from activity reporting to outcomes reporting is a paradigm shift. CIOs today must be just as financially and business proficient as technically proficient to understand the cost/benefit ratios and opportunity cost of capital.” Related:Digitalization — Is It Time for Humans to Intervene? Focus on Outcome Versus Output Orla Daly, CIO at corporate enterprise learning company Skillsoft, reminds her team often that outcomes are more important than output, so instead of reporting in terms of project delivery, they’re reporting on progress made on the expected impact. “As we think about our transformation initiatives, there are KPIs set at the beginning which could be around productivity enhancements but also can be more aligned to drive better customer experience, increase revenue, etc.,” says Daly. Daly says that they have their own operational metrics that are more standard activities around uptime and automation. “We have a dashboard that allows us to see the number of hours we saved through automation, or risk reduction.” Orla Daly, Skillsoft Marco Bill, CIO at open-source solutions provider Red Hat also makes a point of working closely with the business to define and track business outcomes. He says that instead of just looking at IT metrics in isolation, they work closely with the business to identify key areas where technology can drive tangible improvements. “For example, a significant measure for us is order cycle time. By optimizing our systems and processes, we aim to reduce the time it takes from a customer placing an order to its fulfillment, directly impacting customer satisfaction and operational efficiency. This allows us to clearly demonstrate how our IT initiatives contribute to the organization’s strategic goals.” Bill meets with business stakeholders to share transparent, data-driven reports that clearly articulate the following: The IT initiatives undertaken What IT did to impact the outcome Benefits to the business, such as a rising customer satisfaction score, improved on-time delivery rates and how those things contributed to increased revenue and/or reduced operational costs. “These QBRs serve as a
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