How can top management make sure that their CIO and IT department do not invest in bad projects?

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When performance drivers do not have corresponding well-defined outcome measures, investments can be made without a measurement to assess whether the strategy was effective or not. The lack of clear cause-and-effect relationships muddles accountability for poor outcomes that arise from specific IT decisions. Gartner found that “too many IT organizations and too much IT spending is not contributing directly to business growth… In fact, eight out of ten dollars that companies spend on IT is dead money.” Gartner vice president Audrey Apfel urges that “IT leaders need to think differently about how to make the right investment decisions and to measure their value.”

In order to ensure IT investments directly contribute to business growth and enhance competitive advantage, an organization needs to control the formulation of IT strategy. IT Governance provides organizations a process that allows them to assess and control IT to ensure that it returns business value to the organization. This ISACA article highlights the value of using a balanced scorecard methodology to support the alignment of business and IT strategy.
The balanced scorecard methodology provides a measurement AND management system to support IT governance process and the IT/business alignment process. The scorecard is broken down into four major areas:
• User orientation – how users perceive IT
• Operational excellence – IT processes used during the development stage
• Future orientation – resources required (human capital and technology)
• Business Contribution – value of IT investments made

Each of these areas has specific metrics and measures used to assess the current situation, and are used to set goals with benchmarking figures. When this scorecard approach is used, the cause-and-effect relationships become apparent and can steer the business toward making better IT investments into projects that make sense.

Does your organization use an IT balanced scorecard to achieve the proper integration of business and IT decisions? Why do YOU think these scorecards are important?

 

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