The healthiest way to figure out which IT innovations are worth it

Sometimes you might not need to virtualize. You could just buy another couple of servers.

Similarly, you could defer expensive laptops that further enterprise mobility by refurbishing second-hand laptops, or even just sticking with traditional PCs. There are lots of powerful new features in the most recent version of Microsoft Windows, but that doesn’t mean everyone automatically made the jump to Windows 7. The idea of “good enough computing” has been around for several years now, but I was intrigued by a recent article in American Scientist that posited the idea of “just as good medicine.”

Given the rising costs of health care (both here and certainly in the United States), there is obviously a number of potential tradeoffs to consider as innovative new therapies come into the sector. Even if they offer the possibility of positive outcomes for patients, there is the question of whether the system – the providers, public and so on – and afford it. Much like IT departments need to weigh every major investment decision, so do the hospitals. In the article, David Kent explained how this is usually evaluated:

To help maximize the overall benefits in health care under a utilitarian framework and conditions of constrained resources, health economists use an analytic tool called cost-effectiveness analysis (CEA) that quantifies the added expenditure necessary to obtain a unit of health benefit (typically measured in quality-adjusted life years or QALYs, pronounced “kwallies”). The most common application of CEA is to examine the value of medical innovations compared to the standard of care routinely available, since new technologies are an important cause of the increase in health-care costs.

If the “unit cost” for a QALY of benefit (that is, the cost-effectiveness ratio) is less than some threshold (conventionally $50,000 or $100,000 per QALY), then adoption of the innovation is deemed “incrementally cost-effective,” since the benefit obtained compares favorably to that obtainable at similar cost using accepted medical technologies (such as dialysis, which has a cost-effectiveness ratio variously estimated at between $50,000 and $80,000 per QALY). Above the ratio, they are deemed not to be cost-effective. That is, the (relatively small) incremental benefits of the intervention do not justify the (relatively large) incremental costs.

This strikes me as a well thought-out metric, and one which could be extended to an IT scenario. The idea of an IT-oriented QALY is not difficult to conjure. Much like quality-adjusted years of life for a person, what IT managers should strive for, at a fundamental level, is quality years of life within an organization, within teams, among individuals. Quality, in this case, could be the amount of useful information that technology can provide, the productivity it offers to those who use it or the way it facilitates useful transactions with customers, suppliers or partners.

As with health-care, so-called innovations are always entering the IT space, and vendors usually trumpet the benefits without really taking into account the threshold beneath which an IT-oriented QALY of benefit unit cost must reside. True, this threshold and even the unit cost of the QALY would probably vary by organization. But a self-starting IT manager would do well to begin calculating those QALY unit costs now, based on the business objectives or his or her organization. That way, as innovations or opportunities present themselves, it will be that much easier to decide whether it’s worth it. You don’t have to think of this as onerous work. Think of it as playing doctor.

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