Applying the Numbers
How can these ratios be used? In the same way that a company measures investment in research and development as a proportion of total revenues and benchmarks this against others in the same industry. You should be able to show when your company is under-investing in IT and use your ratios to build a case for spending on projects which do not generate a direct return — like upgrading software to ensure continued support or business process improvements.
Today, IT is about providing value, not technology. To show the value of your department, recommends Joyce Gioia, a principal at the Herman Group, a business management consultancy, approach executive committee meetings and board rooms in the same way a good sales person approaches and important prospect.
The fist thing to recognize is this is a selling situation so prepare by knowing what the company’s strategic direction is and where IT fits into that picture. Use anecdotes from trade publications to help justify projects as well as future needs and expenditures.
Next, the easy part: “Quantify, quantify,” said Gioia. Have numbers ready that show where IT has improved the bottom line, for example, or improved business processes.
Preparation is also key. Think about and have counter arguments ready for any objections to current and future spends and be able to justify IT’s importance to the company in terms of value, not just metrics.
And, finally, relax.
“It’s an important one,” said Gioia. “Recognize that the worst that can happen is you stay with the status quo. Part of the stress and pressure … that people put on themselves is a result of their fear of what would happen if my CEO says ‘No’. What would happen ‘If, because I’m asking for this, they decide I’m being unreasonable and I shouldn’t be here anymore?
“But what these CIOs need to get is, given the growth of the industry, now they are going to be in very high demand.”
Ultimately the CIO’s job is to try to ensure that exactly the right mix of IT systems are put in place over time to maximize the profits of the company. You need technical knowledge to devise the right projects, but to ensure they are implemented the skills you need are financial ones.