The Holy Grail: Measuring the Value of IT

Uncategorized Posted Aug 2, 2006 by metropolis

This week, Mike Vizard’s e-alert flags an article from CIO Insight on how companies measure the value of IT. (The article is written by well-regarded journo Allan Alter, who spent a long stint with Computerworld. Allan is now Executive Editor of CIO Insight.)

The site is rolling out the results piece by piece, but here’s a sampling of findings to date:

Only six out of ten companies measure the business value of IT. Even among big companies (those with revenues over $1 billion), one out of five do no kind of valuation at all.

Do CIOs measure ROI often enough? On average, only 41% of companies’ IT budgets undergo an ROI assessment. Only half do an ROI assessment both before and after an IT project is completed.

How best to measure IT’s value? According to the study, the most common metrics are time-to-payback and savings-minus-costs. Companies with revenues over $500 million are most likely to use metrics such as internal rate of return (47% of respondents) and return on assets (35%).