measuring roi and rewarding it executives based on their contribution to profits
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Measuring ROI and rewarding IT executives based on their contribution to profits
Alvin Goh July 2014
The following best-practice frameworks are/may be referenced during this presentation:
ITIL® ITIL® is a registered trademark of the Cabinet Office
The Swirl logo™ is a trade mark of the Cabinet Office
COBIT® COBIT® is a registered trademark of ISACA
Copyright Acknowledgements
Agenda
ROI – How to measure?
Tool – Don’t be a fool
Reward – A part of Governance
Terminology
o Incident Management – Restore service as quickly as possible following an unplanned interruption.
o Problem Management – Stop incidents from reoccurring.
o Change Management – Prompt, efficient & risk-aware handling of changes requested by the business.
Company A (Incident Management)
o Last year, 4 Major Incidents caused total of $100,000 in opportunity costs.
o Mainly due to confusion on who does what, when, where, how.
o After implementing ITIL, 4 Major Incidents only caused $40,000 in opportunity costs.
o Savings due to Incident Management,
= (cost of business impact before) – (cost after ITIL implemented)
= $100,000 - $40,000 = $60,000
Company A (Incident Management)
o Previously, average outage of Major Incident is 5 hours, 1,000 employees affected.
o After implementing ITIL, average outage reduced to 2 hours.
o Further savings due to Incident Management,
= (amount of downtime before) – (amount after ITIL implemented)
= (5 x 1,000) – (2 x 1,000) = 3,000 manhours saved
o Assuming average manhour is $100,
= 3,000 x 100 = $30,000 saved per Major Incident
= $30,000 x 4 = $120,000 saved per year (4 Major Incidents a year)
Company B (Problem Management)
o Last year 5,500 Incidents per month, each taking an average of 5 hours to resolve.
o After implementing ITIL, Incidents reduced to 4,000 a month.
o Savings due to Problem Management,
= (average duration of resolving an Incident) x (number of Incidents eliminated)
= 5 x (5,500 – 4,000) = 7,500 manhours saved
o Assuming average manhour is $100,
= 7,500 x 100 = $750,000 saved per month
= 750,000 x 12 = $9,000,000 saved per year
Company C (Change Management)
o In 2013, there were 3 Major Changes that failed and needed to back out, causing the company $100,000.
o After implementing ITIL, there were less failed Changes costing a total of $30,000, and the amount of rework was reduced.
o Savings due to Change Management (due to failure & rework),
= (cost of failed Changes previously) – (cost of failed Changes after)
= 100,000 – 30,000 = $70,000
Agenda
ROI – How to measure?
Tool – Don’t be a fool
Reward – A part of Governance
Excel - Baaaad
Tool - Good
o Meticulousness – Remove human error.
o Automation – Reduce tedious work.
o Clarity – Easier to present a clearer view.
Our Expectations of a Tool…
A Fool with a Tool…
Tool Customisation…
Watchouts!
o Process dictates how tool should work.
o Configure, not customize.
o Use MoSCoW analysis for requirements.
Agenda
ROI – How to measure?
Tool – Don’t be a fool
Reward – A part of Governance
IT Governance
© 2012 ISACA® All rights reserved.
Stakeholders
Benefits of Happy Employees
Gainsharing
o Gainsharing measures performance through a pre-determined formula and shares the savings with employees.
o Works best when company performance levels can be easily quantified and in a work environment that is based on openness and trust.
o Rewards only performance improvement and payouts are self-funded from savings generated.
Benefits of Gainsharing
o Fosters a culture of continuous improvement
o Enhances employee focus and awareness
o Increases the feeling of ownership and accountability
o Enhances the level of involvement, teamwork and cooperation
o Supports other performance improvement efforts and helps promote positive change
o Promotes morale, pride, and more positive attitudes toward the organization
Take Away
o Always try to measure IT in a way that the business understands.
o Tools help. But be careful.
o Reward your folks!
Thank You!
For further info on related course/s, please see:
http://www.iss.nus.edu.sg/ProfessionalCourses/CourseCatalogue.aspx
Alvin Goh Senior Consulting a.goh@uxcconsulting.com
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