Measuring value

What is business value

I have been intrigued by the question of measuring IT services with business value. It is a great idea but difficult to realize. In my consulting assignments I have come across situations where the customer relationship was very complex and it was quite hard to define any meaningful services. Measuring value is even harder.

Let’s look at a hospital. The work in a hospital can be measured in many ways. Here the example is a unit specialized in breast cancers. It  can be measured with these metrics:

  • the amount of activities i.e. the number of surgeries and other operations
  • the revenue and profit of the hospital
  • customer satisfaction
  • the number of patients alive five year after the operation

All these measurements have their uses but only the last one measures real customer value. The first two measure the activities but not the results. Customer satisfaction is good but it is not the point. Being operated is not nice.

Money and activities can be metrics of business value as long as they are business metrics. The goal of an IT system can be to improve profitability, that is a metric of value. The revenue of an external IT service provider is not a measurement of the business value of its services.

How easy it is to measure business value in IT

In this survey I concentrated on customer relationship and business value. The survey had originally three questions but I added one open question later.  Here are the key results from 76 responses from IT professionals in Finland.

Slide1

Two thirds report that they have a customer who is willing to discuss IT services. We can see that this is the most common situation but it leaves one third who have difficulties in their customer relationship. Half of them do have a customer but the customer is not interested in the work, the other half do not have a customer or cannot really identify the customer.

Slide2

This question proved to be difficult. Originally almost half of the respondents said that their work was measured by business value metrics. Tha lead me to add one more question. I asked respondents to describe the metric. Replies showed that half of the metrics did not actually measure business value.  slide3

In this last graph I compare the internal and external service providers answers. It shows that it is far easier for an internal service provider to measure business value than it is for the external service provider.

Service management is not for all

My conclusion is that while the service management approach is useful, it does not fit all. It is easy to find cases where the relationship is complicated and where it is better not to try to fit the customer relationship model. See my article on that.

Please, vote for me at TFT13

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