In-Depth

Selling IT's Business Value to Management

Why IT must take a lowest common denominator approach to dealing with the suits

• By Stephen Swoyer
• 09/19/2006

If business executives are from Mars, IT managers are … well, not from Mars, in any event. The rub, analysts have long maintained, is that business and IT leaders come from two very different worlds. As a result, they not only speak different languages but often have entirely different perspectives.

The upshot, Cutter Consortium researchers say, is that business and IT frequently talk through (or even past) one another. One way to change this, they argue, is for IT to take a lowest common denominator approach to dealing with the suits.

“The IT organization has been incapable of communicating IT's business impact to business executives. That is, other than IT's cost, the IT organization has not credibly communicated the impact and value of what they do to the business executives who pay the bills,” write analysts Bob Benson, Tom Bugnitz, and Bill Walton in a Cutter Consortium research advisory.

Such advice might seem like a no-brainer, but the Cutter trio says it’s actually a distinct refinement of the prevailing conventional wisdom, which argues that IT should justify itself on the basis of its costs and benefits to the business. While this is as true as ever, the Cutter researchers stress, it’s also undeniably vague. What’s needed, they argue, is a prescription—call it a protocol—for how IT can most clearly communicate its impact to business executives.

Enter the lowest common denominator. “To establish IT's business impact requires expressing what IT accomplishes in business terms, as viewed by business executives. This means describing what IT does with business basics such as return on investment, business process improvement, flexibility and responsiveness to business requirements, competitive differentiation, and so forth,” they write. “This positions IT, in the minds of business executives, like a business service provider, not like a technology supplier.”

As for brass tacks, Benson, Bugnitz, and Walton suggest a four-pronged approach: For starters, they argue, IT needs to express 100 percent of its costs in service-to-business terms—for example, in terms of application services (i.e., the business support IT provides); infrastructure services (the technical support—e.g., e-mail—IT provides), user services (the business-user support IT provides, such as help desks), management services (the internal organizational support IT provides, such as budgeting), and project services (IT’s ability to deliver new business capabilities). Similarly, the trio writes, IT must learn to assess the performance of each of its service portfolios in strictly business terms. Lest there be any confusion about just what this entails, Benson, Bugnitz, and Walton note, IT organizations must articulate their contributions in terms of business/strategic alignment, service-levels and quality, responsiveness and functionality, and technical and business risk.

The Cutter researchers stress that organizations must learn to budget IT in service-to-business terms. What this means, they explain, is that organizations must learn to recast their IT budgets in terms of what it costs them to provide each of their basic IT services, and not just in traditional terms, such as salaries, hardware or software, and so on.

Finally, organizations must charge out IT to line-of-business customers in service-to-business metrics. This, too, calls for a redefinition of the status quo: in this case, the Cutter researchers stress, IT must establish the charge-out—as perceived by business customers—not in terms of conventional metrics (e.g., resource-utilization), but in terms of the overall utilization of each of the services.

There’s a caveat here, however: IT organizations must learn to charge-back for services as they appear to line of business customers, not as they’re understood by IT itself. “CIOs [must] successfully address business executives' demand for more impact and less cost—because the conversation is about what the business units actually receive, in terms of service, and exactly what those services cost. This is the foundation for determining how to proceed,” they conclude.