Communicating the Hidden Return on IT Investment

If IT initiatives are producing positive returns to the organization, but business management is unaware of these returns, a communications gap is clearly present. This gap may be the result of a number of problems:
Problem: IT is unable to calculate the return on investment of its initiatives.Solution: Implement a program of metrics where each major initiative has defined goals and metrics to indicate these goals have been obtained. Translate these metrics into financial terms using standard conversion factors, such as the cost to the company of each employee saved, the value of time saved, increased revenue per customer or transaction, or the savings in time and money from fewer defects. Communicate these financially oriented results on a regular basis.
Problem: There is no standard conversion rate for translating most metrics into financial terms.Solution: Develop a set of standard conversion rates. When in doubt, use either the cost of the resource (e.g., employees, servers, time) or the market value of the services provides (e.g., what the organization would have to pay to have someone else provide equivalent services).
Problem: There is no vehicle to communicate the benefits of IT to management.Solution: Establish such a vehicle that regularly communicates recent initiatives and their results. In an environment of rapid change, quarterly reports may be appropriate. In very few cases should such reports be less frequent than semi-annual. One potential format for such a communication would show the cumulative benefits received (DBenefit), the changes to the IT spending rate (DCost) and any changes to customer satisfaction (DSat) in IT services (see Figure 2). After a defined interval, such as one year, the return on the IT portfolio can then be calculated. Problem: The business only wants to hear about the reduction in IT spending.Solution: Begin to calculate and communicate business-oriented metrics anyway. Eventually, the business will become accustomed to seeing such reports and will question their absence. Credibility cannot be built overnight. One must begin to show fiscal responsibility and use the pattern of calculation and communication to build credibility.