Editor’s note: The following is a guest post by Robert Naegle, research VP at Gartner, Inc.
Communicating the business value of IT is a critical CIO responsibility, yet many CIOs struggle to do so effectively.
In conversations with business leadership, CIOs will often focus on metrics around work performed, tasks accomplished or resources deployed, but such stories are not compelling for a non-technical audience.
Technical terms like “digitalization,” “cloud migration” or “legacy system modernization,” do not show what IT has achieved for the broader goals of the business. Facing economic headwinds and ongoing disruption, it becomes more important than ever for IT to demonstrate the value of technology initiatives.
To tell a compelling IT business value story in a way that resonates with leadership and supports enterprise decision-making, CIOs must focus on communicating outcomes delivered. It is essential to present a case that clearly links investment priorities to business goals.
Otherwise, the CEO, CFO and other business leadership will not understand the full value of IT initiatives and will not factor them into enterprisewide resource allocation decisions.
Gartner recommends seven key rules to more effectively articulate the business value of IT. Organizations can adapt these rules to make value communications more relevant, clear and impact focused, helping to preserve and promote IT’s value amid economic uncertainty.
Rule 1: Value is determined by the stakeholder or consumer, not the provider/producer.
IT’s stakeholders – not IT – determine what is valuable. Without insight into business priorities, IT is likely to remain focused on the delivery of technologies and platforms rather than business objectives, benefits or outcomes.
Often, IT leaders don't know how to ask business leaders for the value story and leaders feel like they have already communicated what is important. CIOs must communicate regularly and openly to identify what executives consider valuable and how those priorities evolve so they can map IT activities accordingly.
Rule 2: Not all outcomes are equally valued.
Impacts to the business mission and/or revenue growth are typically considered more valuable than spend avoided and costs reduced.
In turn, these are considered more valuable (and easier to measure) than efficiencies gained through process improvements. Team up with business leaders to identify and rank their business priorities and desired outcomes, such as value or revenue increases, cash savings and efficiency gains.
Align IT resources accordingly to deliver the prioritized outcomes, so that you can eventually capture and validate quantified benefits with key stakeholders and leadership.
Rule 3: Build two value narratives: run and change.
A common challenge to demonstrating the business value of IT occurs when CIOs attempt to build a single narrative covering all IT contributions. The value of “IT run” (operations) and “IT change” (growth and transformation) are perceived differently by stakeholders.
Split the business value of IT conversation into two narratives by communicating the value of run spend as a function of ongoing business outcomes enables, and the value of change spend as a function of new value created.
Gartner predicts that through 2027, CIOs who successfully communicate the value of IT run by tying run costs to business outcomes and/or business services will be 30% more likely to secure funding required to update and expand existing business processes.
Rule 4: Measure IT’s impact on stakeholders’ objectives, not IT effort expended.
CIOs must measure business outcomes, not IT work. The performance of systems, platforms and infrastructure are valuable elements of IT production, but they do not represent quantifiable value to the business stakeholder.
Instead, measure the impact to intended business outcome as previously agreed to with stakeholders. Then, measure and report upon IT’s specific impact on that outcome. Avoid metrics that communicate effort, work or output.
For example, rather than telling executives that IT delivered 99.9% system uptime, tell the business how IT supported the transaction rate and improved the transactional capacity by 7% over the last two months.
Rule 5: Align IT costs to the business services they enable.
Stakeholders will better understand IT’s value when costs are linked to the business services and capabilities the business understands and uses.
Costing parts or technologies does not support a value conversation. CIOs should communicate costs through the lens of the value delivered at the business outcome level (e.g., cost per seat of an application or cost per transaction of a critical business services).
Include both cost and benefit in all project proposals to determine net value. Value conversations must include both cost and benefit
Rule 6: Communicate IT value in the language of the stakeholder.
Use business language, not technical terminology and acronyms, when communicating IT’s value.
Value communication for business leaders should be clear, relevant, quickly understood and designed to enable decisions. Capture and respond to stakeholder’s need or pain. Avoid deep dives into technology capabilities. Translate value messaging into insights that support critical business decision-making.
Rule 7: Those funding IT must understand the value and impact of IT to stakeholder objectives.
Finance and business leaders who make funding decisions must also understand IT’s value and impact on business outcomes, even when they are not the direct recipients of the value.
In a recent Gartner survey, 94% of CIOs said they believe they understand how technology impacts corporate financials, but only 62% of CFOs agreed.
Strong CFO-CIO partnerships are linked to better funding and outcomes for digital initiatives. CIOs must engage economic buyers early in the value definition process to make spend justification and value definition a collective effort.