Do You Have the Right KPIs to Run IT Like a Business?

Dave Conroy, Managing Director, CIO Advisory

You might remember the old saying about the cobbler’s children—they have no shoes. In fact, the IT function has long been providing “shoes” for everyone in the company except itself as it helps the CEO, COO, and other business leaders exploit information and business intelligence for competitive advantage.

But what if we think about the CIO as the leader of a business that just happens to be IT? Then we can better understand how the right analytics can enable CIOs to gain the insight they need to truly run IT as a business. Basically, it all comes down to leveraging the same practices and measurements that IT customers have been using for years.

Needed: an end-to-end view

Today’s IT function is an enabler for success, serving as a partner that drives innovation, finds new ways to exploit emerging technologies for competitive advantage, and works with its customers to understand demand and then effectively deliver new services and solutions around this demand. In the same way, the IT leadership model also needs a strong focus on demand, with an end-to-end view across the entire IT value chain, not just a point solution. This means that CIOs need to develop a balanced perspective around their investment and service delivery portfolio; retain a strong sense of governance, risk, and control; and bring that entire package together to create the right value both for the IT function and for the customers they serve.

Finding the right KPIs

The real challenge about analytics for the IT organization is not absence of data. IT is flooded with information generated by IT service management, help desks, CMDBs, the complexity of the project portfolio, tracking systems, etc. Instead, the real challenge is how to find the KPIs that IT leaders can use to make the best changes, interventions, and decisions for their IT organization.

These KPIs should go beyond traditional IT metrics involving budget, cost of IT, SLAs, scalability, and reliability. They need to be KPIs that allow CIOs to answer fundamental questions about their organization, such as “how well are the IT projects aligned to the business priorities?” and “how well is the IT organization positioned to enable rapid entry into new markets?”

Since information gathering takes time and resources away from other tasks, CIOs really need to focus just on those five or ten KPIs that actually make a difference. Using a top-down approach, CIOs can build dashboards that provide valuable business intelligence to support decision making without inflicting any unnecessary overhead on the IT organization.

The right information at the right time from the right sources

Developing the right kind of KPIs for IT isn’t something that comes off the shelf with a technology solution. Sure, there are analytical engines out there, along with data warehouses and a host of platforms that are used to facilitate the process, but if you are unclear about the KPIs that drive true value, then all of that technology is largely misguided.

A KPMG-developed framework, called the Intelligent Enterprise, helps business leaders get the right information at the right time from the right sources. This framework can also be applied to the IT organization. In a nutshell, it can define the right KPIs and strategic measures as a function of IT’s business strategy. These KPIs may not necessarily be discrete data points. What they should be are strategic indicators of performance.

KPIs for the IT organization are all about getting the basics right and establishing an environment that has a data hierarchy aligned around the IT organization’s goals and objectives. Three or four years down the road, the next step might be predictive analytics and being able to mine unstructured information for greater insight. For now, however, we think the big opportunity for IT is about finding the most efficient and effective way to deploy the resources of the IT organization as a whole to deliver the best results for their business customers. And that’s not a challenge that requires the most sophisticated big data analysis techniques. It’s more profound. It’s organizational, using the right KPIs to track the things that truly move the needle for the IT function.

Hear Dave talk about how CIOs are utilizing management information as business intelligence to make the most effective decisions in terms of running the business of IT in the KPMG Advisory Institute podcast: IT Analytics Shape the Future of the IT Organization.

2 Responses to “Do You Have the Right KPIs to Run IT Like a Business?”

  1. Thanks for the article. good insights. just one comment.
    I believe your comment “they (KPIs) should be are strategic indicators of performance” should be more expansive.
    1. KPI’s should track capabilities, as well, especially in technical areas like IT. How an organization’s IT capabilities compare to industry standard is, I believe, critical in ensuring that an IT department remains relevant and providing the best and most effective services available.
    This lead to the next item.
    2. KPI’s for IT must include a mechanism to ensure the IT department is evaluating new technologies and comparing against the company’s existing resources and future needs. This KPI measurement is the most difficult to define, but can provide enormous advantages in balancing new technology and actual needs.

    Again, thanks for articles that get us thinking.

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