Rolling Meadows, IL, USA (26 July 2005)—Despite research indicating that more than 93 percent of business leaders recognize that IT is important for delivering the organization’s business strategy, IT-related investments are often reviewed and approved with far less vigor than other types of investments.
Since IT-related costs are exceeded only by staffing costs at many organizations, it is in their best interest to closely evaluate their IT investments and ensure that they add value. To help executives select IT investments and measure their return, ITGI released today Optimising Value Creation From IT Investments, the second of five publications in the IT Governance Domain Practices and Competencies series.
Each of the publications in the series focuses on an aspect of one of the five domains of IT governance: risk management, value delivery, strategic alignment, performance measurement and resource management. The publications are based on a study of 200 IT professionals from 14 countries conducted by ITGI and Lighthouse Global.
Optimising Value Creation focuses on value delivery and notes that 41 percent of business and IT management have an inadequate view on how well IT is performing, and 35 percent have experienced a high cost of IT with low return on investments. With corporate financial strength continuing to grow, IT investments are increasing—and, as with any other investment, full knowledge of the expected cost and return is crucial for increasing shareholder value.
“While IT’s return on investment can be difficult to measure, that must never be used as an excuse for not making the effort to quantify the return,” said consultant Paul Williams, author of the publication and ITGI trustee. “Getting into the habit of spending shareholder funds without having a close eye on the return can lead to corporate disadvantage or complete failure.”
To increase the likelihood of high-return IT investments, ITGI research recommends including the following components in the approval process:
Prepare a comprehensive business case document based on a consistent corporate standard.
Establish an approval board with representation from business and IT.
Provide accountability for delivery of results.
Assure that proper project management processes will be followed, including appropriate (and reliable) reporting.
Assure that all departments affected by the project outcome are involved and commit resources.
Provide for budget overrun based on past experiences (i.e., if IT-related projects typically overrun their budgets by 20 percent, that amount must be factored into the original business case).
Optimising Value Creation From IT Investments is available at the ISACA Bookstore (www.isaca.org/bookstore) in print for US $30 and as a download for US $20.
The IT Governance Institute® (ITGI) (www.itgi.org) was established in 1998 to advance international thinking and standards in directing and controlling an enterprise’s information technology. Effective IT governance helps ensure that IT supports business goals, optimizes business investment in IT, and appropriately manages IT-related risks and opportunities. The IT Governance Institute developed Control Objectives for Information and related Technology® (COBIT®) and offers symposia, original research and case studies to assist enterprise leaders and boards of directors in their IT governance responsibilities.
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IT Governance Institute
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