Defining the Business Value of IT

A new white paper has been posted on SECG web site.  IT spending has risen dramatically over the past decade, yet studies have shown it to be next to impossible to correlate IT spending to traditional business metrics such as ROI or productivity.  Many models have been proposed, which are complex and, most often, rely on proprietary data.

A thorough examination of the literature shows that these complex models can be reduced to two key concepts: 1) Enterprise IT Architecture, and 2) Technology Lifecycle Cost Management.  IT spending is driven by the enterprise architecture as part of pre-defined business strategies and initiatives.  This, coupled with the employment of a risk-adjusted lifecycle cost management methodology to optimize IT costs, provides the desired framework for defining the business value of IT.

It is proposed that the creation and implementation of a formal enterprise IT architecture, coupled with lifecycle cost optimization initiatives, will assure that IT projects will meet a minimum hurdle rate within the business, or, nominally, the recovery of the cost of capital.  Such an approach has potential of broad acceptance in defining the business value of information technology.