A nine-country survey of 1,217 IT professionals reveals that enterprises worldwide believe they are realizing value from their IT investments - yet they cannot be sure, as fewer than half have a shared understanding of value across the enterprise, and two-thirds fail to fully measure it.
Conducted by ISACA, an association of 86,000 IT governance, security and assurance professionals, the Value of IT Investments survey found that half of the respondents believe they are realizing between 50-74% of expected value from their IT investments, and nearly a fifth believe they are realizing 75-100%. Yet, half measure the actual value only “to some extent,” while one in 10 does not measure it at all.
Paul Williams, IT Strategy Chair and IT governance adviser to Protiviti UK stated, “this survey illustrates the massive potential for value destruction from ill considered IT related business investments. The lack of value measurement can lead to misleading and unreliable business cases and the consequent approval of discretionary projects that are unlikely to add to value creation. A more robust approach to all aspects of IT investment governance can lead directly to improved financial and operational performance”.
At the same time, half of the respondents reported that accountability for such value measurements is delegated to the IT function itself, instead of remaining with the business, where it belongs.
The lack of business accountability for value from increasingly significant and complex IT-related investments is reflected in the 49% of respondents stating that the CIO or IT managers are responsible for ensuring that stakeholder returns on such investments are optimized. Only 15% said responsibility lies with the board, 11% the CEO and 9% the CFO. Remarkably, 8% said no one was responsible.
On a positive note, 76% of respondents are aware of the Val IT framework, and 44% of organizations questioned have such a framework or guidelines in place to select the investment that will result in the highest value.
Additionally, despite the challenging economy, 30% of companies are increasing their investments in IT this year, while only 13% plan to reduce spending and 14% plan to freeze it at the current level. In the UK this average isn’t replicated, as just 19% of organizations intend to increase their investment while 20% plan to cut spending across the board.
Interestingly, among the benefits organizations receive from their IT-related investments, respondents cited “improved customer service” (35%) and “cost reduction” (24%) as the two most important. Somewhat surprisingly, only 16% named “new or improved products and services” as the top benefit. India stands out, with improved customer service as the top-ranked benefit, at 45%.
“Organizations should be careful not to ignore the value-generating opportunities of IT in favor of cost cutting. IT has the power to add competitive advantage and significant business value, so it is critical to focus on those opportunities-particularly in troubled economic times,” said Robert Stroud, CGEIT, international vice president of ISACA. “The implementation of Val IT can help enterprises identify more effective metrics, leading to successful investments in IT projects that better align with the strategic goals of their business.”
The survey identified some regional differences-specifically between established economies and fast-growing ones. Of the nine countries surveyed-Australia, Canada, France, Germany, Hong Kong, India, Mexico, the UK and the US-the India-based participants were the most advanced in adopting effective value management practices and assigning accountability for those investments to the business. Seventy percent of respondents’ organizations in India have a framework for selecting the IT-related investments that will result in the greatest value and 57% fully measure value.
In addition, almost half of Indian organizations are increasing IT-related investment based on potential or expected contribution to business value, and 63% said there is a cross-departmental understanding of what constitutes value in IT investment - a figure significantly lower in the UK, at just 22%, and the US, at 34%. Top-down management responsibility for optimizing IT investment was also evident, with one-third of respondents indicating board or board chair level.