alfabetConnect
Measuring the Value of Business IT Management
In a cost-conscious corporate world, one of the challenges IT organizations are facing is to improve the effectiveness of their IT investments. Since capital expenditures (CAPEX) today will become operational expenditures (OPEX) tomorrow and will impact the annual IT budget, every investment must be as effective as possible and aligned to business strategies.
Enterprise architecture management (EAM) is able to help reduce operating expenses as well as prevent ineffective capital investments. This is why many organizations have invested in EA programs over the past years. But, the value of EA remains difficult to measure. While qualitative criteria such as transparency, standardization and better communication are often named by organizations as the results of their EA programs, they still struggle to measure the quantitative benefit in financial terms. As an EA solution provider with over 10 years of experience, alfabet can help IT organizations understand the monetary value of their EA activities. Using our work with global corporations as our foundation, we developed an in-depth Value Assessment which identifies the incremental value of enhancing existing EA capabilities through implementing Business IT Management (BITM). The result: potential cost savings and achievable increases in investment effectiveness are identified in euros or dollars including the anticipated productivity increase calculated in man years.
The ‘value contribution’ of BITM is calculated by reviewing the annual IT budget. The following key data are analyzed during the value assessment:
- Annual IT budget
- OPEX / CAPEX ratio
- % of CAPEX that becomes OPEX in subsequent years
- Project effectiveness
Current EA penetration per defined areas, e.g. technology standardization, application rationalization, roadmapping, etc. The cornerstone of the value assessment is an in-depth interview with a key individual in the organization. A predefined questionnaire measuring relevant IT capabilities is used to capture the needed information and then the results are weighted against best practices to determine the participating companies’ projected financial results.
Once the assessment has been completed, the outcomes will be presented and discussed: current EA penetration; the resulting anticipated impact to OPEX; and CAPEX effectiveness development. All results are shown in comparison to the potential outcome when BITM is applied which leads to a concrete number in €/$ of average yearly OPEX reduction and average yearly CAPEX effectiveness increase.
The value assessment provides companies with an opportunity to analyze their IT capabilities and define the quantitative value of their EA programs based on a proven, implementable approach. The anticipated value of future investments, based on BITM, is calculated to demonstrate where the most beneficial next steps in the EA program should be.
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