Measured IT success: how to drive value through all of your IT implementations with the help of the Balanced Scorecard.

A review of Value Driven IT Management, By Iain Aitken (Butterworth Heinemann, 2003)

The IT function is often considered simply part of the cost of doing business--a necessary adjunct to a number of much more critical business issues. For that very reason, it's often outsourced and considered only a peripheral part of an organization's functions, or managed piecemeal through various divisions of a firm.

In Value Driven IT Management, however, author Iain Aitken argues for the need to assess an organization's IT function in terms of its value to the whole business. The author speaks from experience, having worked as an IT consultant for 18 years, turning IT functions into cost-efficient, or at least incrementally better, performers.

Aitken divides the goals of the IT function between supply and demand. The supply side searches for cost efficiency and effectiveness. The demand side is looking for added value and quality. Supply-side goals determine what an organization can produce; demand-side goals explain what others want from the organization.

Which goal has priority depends on whether the IT function is run as a cost centre, an investment centre, a profit centre, or a service centre. Cost efficiency is the primary focus of a cost centre and cost effectiveness is the most important goal in an investment centre. Aitken recommends running the IT function as a value centre, the goal of which is to maximize added value to the business as a whole.

Aitken outlines six critical success factors for a value-adding IT function:

* Alignment: optimize the alignment of the IT function with the business.

* Competitive advantage: identify IT opportunities that make the business more competitive.

* Portfolio alignment: align the strategic portfolio of the IT function with that of the business.

* High value projects: give priority to IT projects that yield the best value to the business.

* Value delivery: sustain the value-adding imperative at all stages of IT project development.

* Benefits realization: focus IT projects on optimizing their promised benefits.

Each success factor is discussed in detail and best value practices are defined for each. The appendix to the book contains a questionnaire for assessing an organization on these six critical success factors.

The goals of the IT function are compared to the perspectives of Kaplan and Norton's Balanced Scorecard. In fact, Aitken outlines measurements for each goal. Cost efficiency is paired with the financial perspective of the Balanced Scorecard; the goal of effectiveness is linked with the internal business process perspective of the BSC; the customer perspective of the BSC is divided into the quality and added value perspectives. Aitken adopts these two customer perspectives, instead of just one, since he feels that the Balanced Scorecard should focus more on the demand side of an organization. The author leaves the learning and growth perspective of the Balanced Scorecard out of the book. He argues that this perspective is too hard to measure in this model.

In Aitken's Balanced Scorecard, each perspective is divided into areas that are each measured by Key Value Indicators (KVIs). The book contains Aitken's best KVIs. For example, the components of the Value Added perspective are IT function alignment, competitive advantage, portfolio alignment, and benefits realization. The best KVI (of IT function alignment) assesses the degree that IT objectives contribute to high-level business objectives.

The author offers his opinion on many contemporary management practices. He doesn't recommend having an external service provider for the IT function since an external service provider looks after its own profits and isn't concerned with the business as a whole; an internal IT function can work towards maximizing the business' profits.

Although he doesn't dismiss them completely, Aitken is not enthusiastic about traditional IT best practices. He considers other goals more important than best practices, which are often focused primarily on the supply side of IT and often lead to increased costs, delayed delivery, and reduced value.

Overall, Value Driven IT Management is highly readable and pragmatic. There are many pointed suggestions for increasing the value of the IT function in any organization. The book is useful to an individual who is developing measurements for the contribution of the IT function since it contains many lists of critical success factors and descriptions of other metrics. The adaptation of the Balanced Scorecard that is outlined in this book, is particularly interesting because there are few books that have touched on this topic thus far. Value Driven IT Management is a useful addition to the library of anyone who is looking for strategic solutions to evolving challenges.

Reviewed by Patrick Buckley, CMA

Patrick Buckley, CMA, Ph.D., is a program analyst in Ottawa.