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The
perceived purpose of IT investments in midsize businesses
(MSBs) has changed in recent years from the cost
of doing business to ensuring that business initiatives
are enabled and supported. As a result, IT investments
should now be accounted for in the enterprise strategy,
and measured for their contribution to the bottom
line. The success of the IT organization in delivering
value to the business has less to do with the underlying
technology than with the business processes that
IT supports to deliver and maintain core competencies.
What strategies and best practices should midsize
businesses employ to achieve the expected returns
on IT investments? Following are key components for
aligning business and technology:
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Involve
IT executives in the development of the
business strategy.
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Reflect
the business strategy in the IT strategy.
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Fund
allocation only to projects demonstrating
alignment to enterprise objectives.
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Tie
incentives to IT executives and staff
to reach enterprise goals.
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Use
business metrics to measure the contribution
of IT projects to business value.
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Application
of business knowledge to technology decisions and
priorities should be a development goal in IT department
performance plans. But at the same time, management
should create an appreciation of the potential
value of technology to the business among business
line executives and their staff. Items as simple
as creating a dialogue and recurring meetings involving
both sides should take place.
Achieving
Expected Returns
Many midsize businesses have not realized the
value they had hoped for from technology because
of underinvestment
in two key areas:
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Not
every IT investment will yield business
results. The key is in prioritizing those
investments for which business value can
be defined, measured and attained in
a given timeframe. At least
30% of technology spending should be allocated
toward non-utility and infrastructure investment
enhancement activities.
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Many
midsize businesses simply don't
assess the business benefits of the IT
solutions they purchase, such as increased
efficiency, optimization, improved customer
relationships and revenue
opportunities. Technology alone can't
deliver business value; it requires concurrent
efforts in the areas of process, culture and
organization to unlock the potential of the
underlying technologies and bring true business
benefits.
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Measuring and Monitoring the Contribution of IT
Business and IT executives alike must move beyond
IT metrics and develop a model that measures the
impact of technology investments on the business.
Once a mutual understanding of the business strategy
is established, IT and business executives should
work in concert to identify the business metrics
which align technology investments to the business
goals. Midsize businesses can use benchmarking
and scenario planning to determine key performance
indicators and measurements relative to critical
IT business process.
Learn more about establishing IT financial credibility
in the midsize enterprise. Click
here for details.
References
Research Note
SMB Executive Concerns: Does IT Boost Performance?
Publication Date: November 8, 2002
Author: M. Yamamoto Krammer, J. Browning, R. Anderson,
R. Brown
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