Measuring the Strategic Value of Information Techn

MeasuringtheStrategicValueofInformationTechnologyInvestmentsbyKurtW.ConradBoeingComputerServicesRichland,Inc.AbstractValueisoftenperceiveddifferentlybytheproponentsofnewinformationtechnologiesandthosewhoallocateresourcesanddefinepriorities.Suchdifferencesoftenbecomearoadblocktomeetingtruebusinessneeds.Projectjustificationsregularlyrelyoncalculatedcostsavings,whichrarelymeasurethefullbenefitofnewtechnologies.Infact,ifcostsavingsprovideacompletepicture,thentheorganizationisprobablyjustautomatingroutineclericaloperationsandhasabandonedeffortsthatwouldprovidesignificantstrategicvalue.Strategicvalueisnotlimitedtofinancialcalculations,butincludesquality,timeandriskcriteria.Thispaperdescribesapproachesformeasuringstrategicvaluethatcanprovideorganizationswithproventechniquestoimproveperformance,reengineerprocesses,benchmarkperformanceagainstothersuppliers,identifyoutsourcingopportunities,ordefendthemselvesfrompressurestooutsource.Manyorganizationsrespondtotighteningbudgetsbycuttingoverhead.Thesemeasurementapproachescandemonstratehowoverheadiscriticaltoorganizationaleffectivenessandhowcostsavingscanbefound,instead,bymeasurablyimprovingperformancethroughouttheorganization.IntroductionWhatisstrategicvalue?Whyfocusonstrategicvalue?How?Theobjectiveofthispaperistoprovidemanagersandinformationmanagementprofessionalswithamodernframeworkofconceptualtoolsandpracticesformanaginginformationmoreeffectively.Thefirstsectionfocusesonthecoreproblemsfacingmostgovernmentalandmanycommercialorganizations—ineffectiveorganizationsandineffectiveinformationmanagementpractices—andshowsthatthetwoaredeeplyintertwined.ThesecondsectionisbasedontheanalysisofPaulStrassman,whoarguesthatanover-relianceonfinance-basedconceptsofvalueistherootcauseoftheseproblems.Thethirdsectiondescribesavarietyofsolutionsthatarebasedonapplyingperformance-basedconceptsofvalue,orwhatispopularlyknownasstrategicvalue.ThelastsectiondescribesthelegislateddriversforthisshiftinfocusanddescribeseffortsunderwaywithintheDepartmentofEnergyandattheHanfordSitetoimplementtheapproachesdescribedinthispaper.1TheAuthorsReferencedinthisPaperHammerandChampyReengineeringtheCorporation,byMichaelHammerandJamesChampy,isreferencedperiodically,butnotsummarizedindetail.Itspopularityhasalreadyintroducedalargeaudiencetoitskeyconcepts.Whiletheapproachisconsistenttotheonescovered,theauthorsdonotexplicitlytalkabouttheconceptofstrategicvalueasitrelatestoinformationtechnologies.Instead,theycompletelyintegratethinkingabouttechnologyimprovementswithchangestobusinessprocesses.StrassmanDuringthelate1980s,PaulStrassmanmanagedtheCorporateInformationManagementgroupwithintheDoD.Byconsolidatingpayrollsystems,hesavedDoD$2Bthefirstyearandapproximately$4Bthesecond.HiswritingshaveinfluencedreintegrationeffortswithinTheBoeingCompany.In1975,whenhewastheChiefInformationExecutiveatXerox,Strassmanpitcheda28%budgetincreaseforinformationtechnologies.Althoughtheexpenditureswereforcustomer-initiatedprojects,theExecutiveCommitteethrewhimoutonhisear,tellinghimtocontrolcosts,notexpandscope.Thatstartedhisresearchintotherelationshipbetweenexpendituresoncomputertechnologyandbusinessprofitability,whichhedocumentedinhis1990bookTheBusinessValueofComputers.GeneralAccountingOfficeTheGeneralAccountingOffice’sExecutiveGuideImprovingMissionPerformanceThroughStrategicInformationManagementandTechnology-LearningFromLeadingOrganizationsisthesinglemostimportantworkinthisareathatIhaveyetfound.Getit.Readit.Makecopies.Givethemtoyourcoworkers.Distributethemupanddowntheorganization.EvenifIretypedallthepassagesthatIreallylike,itwouldbeapoorreplacementfortherealthing.IfyouworkforaFederalagencyorcontractorandfeelyouhaven’tseenenoughdirectionfromthetop,thiscouldhelp.Bytheendof1994,theGAOexpectstopublishatoolkitthatcanbeusedtoassessperformanceagainsttheelevenfundamentalpracticesthatareidentifiedintheExecutiveGuide.It’sasafebetthatatleastoneFederalagencywillbeauditedagainstthesecriteria.TheExecutiveGuideistheresultofcasestudiesoftheinformationmanagementpracticesoftheseniormanagementteamsof19organizations.FiveprivatesectorandfivestategovernmentorganizationswerechosenbasedonindependentevaluationsoftheirsuccessinaligningITwithmissionperformance.NineFederalagencieswereselectedascontrols.Ittakesaverycomprehensiveapproachandeffectivelysummarizesandintegratesmanyoftheotherapproachesdescribedinthispaper.Activity-BasedManagement/TheGovernmentPerformanceandResultsActOneoftheapproachesdescribedintheGAOExecutiveGuideiscalledActivity-BasedManagement,orABM.ABMisalsobeingdrivenbytheGovernmentPerformanceandResultsActof1993(GPRA).JimBrimsonisoneoftheleadingexpertsonABM.HecontributedtotheGPRAandmorerecently,hasjoinedtheCAS(CostAccountingStandards)Board,whichdefinesthestandardsforDoDandDOEfinancialsystems.MuchoftheinformationonABMwasbasedonthecourse,ActivityAnalysis:ManagingTowardsExcellence,thatBrimsontaughtattheHanfordsiteinFebruaryof1994.MeyerandBooneBoeingComputerServices,RichlandhassubscribedtoaseriesofDeanMeyerTeleforumsforseveralyears.Acoupleofthemhavedealtwiththe