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IT performance: Repositioning IT as a valued business partner


Johannesburg, 21 Apr 2004

Historically companies have been under pressure to increase business effectiveness and decrease costs, but never more so than now. Since the IT function is seen as one of the key levers to achieve this goal, IT has also been confronted with ever increasing demands to reduce costs despite increased demands from the business community.

Seen in this light, companies are insisting that IT functions, internal operations and outsourced partners alike, realise value for money. As mere cost savings are not sufficient means to accomplish value, the focus has moved to proving value to the bigger organisation and repositioning the IT function from being seen as a cost centre only, to being a valued business partner. As a result, IT performance management has become critical in order to measure, manage and improve the value of the IT function.

IT performance management necessitates the establishment of standard, commonly accepted processes and measures to demonstrate value to business leaders in a continuously evolving IT environment. To address this, a number of organisations are looking at implementing the Control Objectives for Information and Related Technology (CobiT) framework and applying concepts from the IT Infrastructure Library (ITIL).

Focusing on IT performance and particularly on IT performance improvement enables organisations to evolve towards:

* Maximising the value of investments into mission-critical systems and gaining sustainable competitive advantage over competitors;
* Aligning IT strategy with business strategy to ensure priority focus is placed on activities that support and enhance business objectives;
* Investment in appropriate technology;
* Demonstrating characteristics of excellence and comparing favourably to organisations of similar complexity through benchmarking;
* Maximising shareholder value by efficiently and effectively utilising and managing organisational assets.

In order to improve performance of the IT function, organisations have to focus on proving value obtained from the day to day operations associated with running the systems, as well as the creation of value through investing in IT in order to gain competitive advantage.

Through regular IT assessments and appropriate benchmarking of key performance indicators organisations can potentially reduce costs and increase customer and supplier satisfaction. However, benchmarking relevant aspects of the IT function also encourages organisations to strive towards excellence through enhancing the efficiency and effectiveness of business systems and processes, increasing the understanding and implementation of underlying controls in the business and mitigating risks associated with IT.

Additionally, focusing on investment in new systems or system amendments can assist organisations in addressing process changes and improving business performance. However, care should be taken to invest in initiatives tightly aligned with the business strategy in order to gain maximum economic value. This process can be facilitated by focused reviews of business processes and particularly the extent to which they are automated, as well as the development and review of an IT strategy that supports the business direction.

It is commonly understood that a strong correlation exists between organisational profitability and an effective IT function. Thus it becomes imperative for organisations to measure the effectiveness of the IT function in order to successfully manage IT performance improvement. Some organisations are looking towards the balanced scorecard to facilitate this process by developing relevant metrics aligned with business goals covering a number of aspects within the IT function, including IT processes, application portfolios, information management, support services, customers, the IT organisation, technology, external services and IT finance.

Some of the key benefits to be obtained by successful IT performance management include:

* Reduced IT costs;
* Improved relationships between business and IT;
* Better alignment of the IT function to the business strategy;
* Making better use of existing technology;
* Improved IT governance and control;
* Ability to measure IT performance;
* Improved relationships with key suppliers;
* Identification of key IT enabled opportunities and prioritisation thereof;
* Improved sharing of management information and knowledge.

Through this process, the IT function can evolve towards being a true business partner within the organisation, able to create sustainable competitive advantage in a fast changing business landscape. Without managing the performance of the IT function, organisations risk being burdened with IT as being another cost centre whilst not exploiting the vast potential of IT to be an enabler for the business at large.

The KPMG IT Performance service line employs tried and tested methodologies based on international good practice frameworks such as CobiT and ITIL to assist organisations in their journey towards establishing and measuring an effective and efficient IT function.

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Editorial contacts

Arvind Hari
KPMG
(011) 647 5335.