Effective Measurement and Management of IT Costs and Benefits (Computer Weekly Professional) [Hardcover]

The authors start with a chapter on the elusive nature of IT benefits, and the difficulties of measuring and managing them. This chapter lays the groundwork for the rest of the book. One nugget of valuable information given here is the recommendation that IT be run based on P&L (profit and loss). Because IT is traditionally operated as a cost center instead of a profit center I first thought that this was overly radical. However, as I dug deeper I understood the true intent: to tie together investment, value and economics, and measure IT investments based on their derived value to the business. This is where profit comes in. It initially looked like thinly disguised cost/benefit, but the expansion of this concept as the book unfolds makes it look like a true P&L approach.

Chapter two focuses on reasons to evaluate IT investments, and gives a number of approaches to perform evaluations. It covers the strengths and weaknesses of each approach and also discusses some of the pitfalls of benefit evaluation. This material segues into chapter three, which covers the investment decision process. The authors did a good job of explaining this from an IT perspective, and ties it closely to meeting business requirements.

The next chapter discusses the issues associated with, and the techniques used, to perform the IT evaluation. This is where the book gets interesting and a coherent method for measuring IT costs takes shape. What I liked most about this chapter is the list of possible techniques you can employ and how the authors classified techniques based on relative strengths such as objective vs. subjective, etc. This allows you to select the best approach based on the degree of precision you are willing to accept and your goals.

Chapter five, identification of IT costs, is about what we all struggle with: identifying total costs of ownership, finding the "buckets" into with to place the costs, and the cost drivers themselves. The costs are divided into direct and indirect cost portfolios, and the cost breakdowns for each portfolio are comprehensive. This material is valuable and will lend itself nicely to a number of approaches, among them activity-based cost management. Chapter six, IT Cost Control, shows you how to manage the costs that you identify and is a good primer on IT budget management for those who find themselves in a new management position.

IT Business Case Accounting, the topic in chapter seven, presents a straightforward approach to building your business case for IT investments. This is "must" reading for IT management and consultants. Chapter eight, Risk Analysis, is standard fare if you are familiar with these techniques. It is covered completely and provides a solid foundation in the science of identifying, quantifying and managing risks.

My favorite chapter is nine, Evaluation of the IT Function. As a consultant who performs such evaluations I thought I knew a thing or two. This chapter sparked some ideas, and the accompanying checklists are worth their weight in gold. Not only is there a comprehensive set of checklists, you are also shown how to assess the results. Contrast this with books (and consultants) who provide findings, but fail to show the root causes of the findings or make valid recommendations based upon them.

Chapters ten, eleven and twelve tie up some loose ends by covering Ranking and Scoring of the evaluations, Determining Value for Money, and Designing IT Surveys for Benefit Measurement. Taken together these three chapters can stand alone as a small book on using quantitative methods to measure IT value. Chapter thirteen addressed project management issues, which were fairly generic, and the authors end the book with a chapter on final thoughts. They include nine appendices, of which the following provide additional value: C - Financial Measurements used in Cost Benefit Analysis (great primer for non-financial types), D- Factor Analysis (advanced techniques for correlating questionnaire responses), E- Sample Sizing Scenarios (how to select sample size using statistical techniques), F through H Questionnaires and associated issues (the questionnaires are more excellent material for consultants and auditors).

This book provides a roadmap to measuring and managing IT benefits. The approach is straightforward and the goals are achievable (although not without a lot of hard work). It also provides many valuable checklists that will serve you well regardless of whether you are intent on implementing a measurement and management program, or are just seeking some techniques to more effectively manage an IT function. I strongly recommend this book to all consultants who perform IT organizational analysis, and members of IT governance committees or program management offices.