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5 Ways to Find Out the Business Value of Your IT Operations

Since companies are undertaking several ventures based heavily on IT and technology, they must know the business value they are deriving. Your company now has two roles—service facilitator and business innovator. In this article at Apptio, you get to know the business value of your IT operations.

IT Value Optimization

To understand if the energy, time, and money you invested are being utilized efficiently, know the current state. You can do that through the following financial metrics:

  1. Unit Costs and Benchmarked Expenditure: Unit costs are the costs that you incur to the company to provide clients with the promised services. Client computing costs like desktops and mobile equipment, storage expenses, service level computing spends, etc. are some of these expenses. When you benchmark unit costs with the industry, you get to know where you are saving and losing money.
  2. Cost Ratio—Fixed and Variable: For the majority of the companies, fixed costs form two-thirds of the total department cost. When you leverage variable cost, you can prioritize spends and pour budget to areas that require more attention. Measure your fixed to variable cost ratio to optimize spend as per your business needs.
  3. Direct and Indirect Cost: After identifying the areas you have expected the costs to come from, you can determine the direct and indirect costs. However, ill-equipped systems and processes make it difficult to distinguish one cost from the other. To understand and measure the ratio better, use technology, keep a tab in organization-wide changes, and unit incentives.
  4. CapEx Ratio: While you can figure out OpEx through your income statement, companies generally mark CapEx as assets. This includes costs incurred due to hardware, software, deployment, and development. More than OpEx and CapEx ratio, you must concentrate on IT CapEx-to-asset ratio. It is difficult to measure this ratio for the department as it depends majorly on the technology performance. So, you should not calculate costs for capacity planning and business projects in this ratio.
  5. Budget—Actual and Forecast: Budget calculation can be an annual ritual, but you should perform budget forecast frequently. This estimated cost is added to the actual expenditure you have planned for the entire year. To govern the department better, it is necessary to understand your variables for early preventive measures. CIOs fail when you do not forecast these added expenses beforehand.

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