Modeling IT Services for Business Value Measurement (ITBM)

In the earlier article, I explained that whether IT is considered as a strategic differentiator or a commodity, organizations need to come up with a consistent framework to measure its value to business on an ongoing basis.

One way to come up with a measurable framework is to think of business and IT organizations as a set of service providers to their respective constituents. The line of business units (LOBs) provides a set of business services to customers and internal IT organizations commits to providing a set of IT Services to these LOBs. Once we have this high level IT Service delivery based organizational model in place, it is a matter of arriving at proper attributes of measurement.

For each IT Service, we can define three key attributes: Impact, Availability and Effectiveness. Depending on the organizational maturity and IT automation, we can compute the numerical values for each of these three attributes for every IT Service that is being provisioned to a given LOB. The business value of an IT Service can then be numerically defined as a weighted average of these three attribute values.

Let us take an example of Sales LOB in a consumer products organization. In this example, the Sales LOB manages direct and indirect sales and bulk of its revenues comes from online and mobile platforms. The Sales LOB uses four IT Services for its service delivery: Network Operations, Mobile Delivery and BI Reporting. Let us call these IT Services: ITS1, ITS2, & ITS3. The business value of each of these IT Services for Sales LOB are then defined as:

Business Value of IT = (ITS1_EFF + ITS1_AVL) * ITS1_IMP

Where ITS_IMP is the impact of the given IT Service for the LOB, ITS_EFF is the effectiveness of the provisioned IT Service and ITS_AVL is the availability of the IT Service for the LOB.

Once the numerical values for the Business Value are computed, we can represent them in an easy to understand visualization dashboard. The power of this model is that the LOB owners can visually understand the business value of IT Services that they are using and can have a meaningful discussion with the CIO office to improve the effectiveness of these IT Services. The CIO office can articulate its Services and set a stage for proper IT Service Planning exercise for each LOB.

We have seen how a simple measurement framework can be defined for IT Services planning and delivery. Three key attributes names, Impact, Effectiveness and Availability are the basis for our measurement framework. We can look at how these attributes are calculated in different types of organizations in subsequent posts.

This article was originally published by Sagar Asingaraju in CIO Analytics.


About Sagar Anisingaraju

mmAs Saama’s Chief Strategy Officer, Sagar Anisingaraju creates strategic initiatives that lead Saama into emerging business areas and products with competitive differentiation. Sagar was recognized by PM360 in 2019 as one of the "100 Most Influential People in the Healthcare Industry" for his expertise as a strategist. Northwestern University’s Kellogg School of Management published a case study on the transformation journey that Sagar led for its MBA class of 2018. Sagar was also recognized as the Chief Strategy Officer of the Year in 2013 by Innovation Enterprise.

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