IT managers need to benchmark

IT managers’ greatest shortfall is that they often fail to communicate their shops’ importance to their companies – something they’re not easily prepared to do because they don’t benchmark assets and projects as a way of measuring their companies’ IT investments, according to Meta Group Inc. analysts today.

During an hour-long teleconference today that focused on benchmarking IT portfolio performance and running IT shops like a business, three analysts focused on IT organizations that made a fundamental commitment to understanding technology performance and created performance measurement programs.

It “had a very large impact on their ability to constantly perform and transform,” according to Karen Rubenstrunk, a senior vice-president in charge of executive services at Stamford, Conn.-based Meta Group.

“What we’re talking about is [using] many of the same approaches that are used in normal portfolio management,” she said. “That allows you to have communications with the business [side] on terms they can understand.”

One example, Rubenstrunk said, could be to discover how server downtime or system availability affects a company’s operations.

“You ask IT people, and they don’t know,” she said. “Ask, ‘How many customers are using that system? What are they doing? What is the impact of them not being able to use it?'”

Among Rubenstrunk’s suggestions: Organize your investments in order to help you understand what should be used where, figure out what investments are dependent on one another, and determine what investments are used to run the business or are currently being created to grow the business.

“Benchmarking used as a tool is most effective when [you] first use it on yourself to understand yourself and where you are in your mission, mode, metrics and maturity,” she said. That information can then be used by IT managers to measure themselves against their peers.

By following a portfolio management plan, IT managers can better understand the life cycle of their assets, enabling them to explain to business executives the difference, for example, in the life cycle of a desktop asset versus the life cycle of an application asset (usually 18 months vs. five to seven years, respectively).

Even an IT shop that benchmarks its IT portfolios may look at only a static snapshot, comparing it with historical information instead of charting it constantly against internal progress and industry best practices, said Howard Rubin, a Meta Group executive vice-president and research fellow.

Rubin cited the example of one company that looked at IT’s cost per employee, income per employee and sales per employee.

“It showed what they were paying in IT costs per employee, and they were underperforming in terms of revenue per employee and overperforming on sales per employee,” he said. “The point was the IT investment was targeted more at supporting sales than profitability.”

Rubin suggested getting online information on industry IT portfolio management practices “so you’re always calibrating yourself against the moving market, just as you would do with a financial portfolio.” That way, he said, you’ll be “always finding market opportunities throughout the year in terms of cost, price, performance and process.”

Michael Pedersen, senior vice-president and a managing director at Meta Group, said the connection between an IT portfolio and asset measurement leads not only to an ability to cut costs but also the ability to “align those two things.”

“You need to go back and say, ‘Where is this company, and where does it need to go? What are some of the things I have to change to reach those objectives?'” he said. “That’s where a measurement program needs to start.”