What is the #1 Metric for IT Success: Business Impact, Cost Savings or Something Else?

May 8, 2012 Balakrishna Narasimhan

By Nara Balakrishna(@bnara75) and Steve Pruden (@stpruden)

Michael Krigsman’s recent post estimating the worldwide cost of IT failure at $3T sparked an internal debate about technology investments and how to measure IT success. In the traditional view of IT as a cost center, success is measured in primarily in terms of IT cost as a percent of revenue. IT leaders are applauded when they can deliver projects under budget, on time, and keep the overall cost low as a percent of revenue. But, is this actually good for the business?

The cost-center view of IT has been challenged recently by the advent of technologies such as cloud, social and mobile that have the potential to impact top-line metrics such as customer engagement, retention, cross-sell and more. In fact, the Hackett group has found that world class companies invest 5% more than the median on technology while spending far less than in areas like Finance, HR and Procurement. Why is this? Is it because forward-thinking companies recognize that IT can be a differentiator and a strategic enabler?

Battle of the Brains – Appirio Experts Debate the Best Single Metric
So, the question we’re debating is, “How IT should be measured?” Is it business impact, cost savings or something else entirely? Here’s one case for business impact as the metric:

On the flip side, here is a case to continue viewing IT as a cost center, where success is measured primarily in terms of IT cost as a percent of revenue:

We’d also love to hear from you. What do you think? Please add your thoughts in comments or tweet them using #appirio #itsuccess.

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