Despite broad support for IT and being deeply integrated into most every company activity, senior business leaders are still questioning if they are getting enough value from their IT investments. No wonder, given that for most companies IT is a significant component of capital spending—typically between 50%-75%. For the vast majority, more than 70% of this is in fixed costs, and when you take into account the prior year "carry over" spending, and depreciation, a very small percentage of IT spending in a given year may be creating real value for the company (and that's assuming that those initiatives are successful).

Now consider this scary fact from survey and interview research we've done over the past decade: Fewer than 12% of companies can accurately measure the business impact of their IT investments.

At the risk of stating the obvious or worse yet, sounding superior, whether this fact is true, half true or just a little true, it is absolutely unacceptable!

As I discussed in my last article, IT as a profession has a constant self esteem problem. CIOs want to matter, they don't want to be a cost center, and they desperately want a "seat at the table." Then why on earth would we allow such a fact to be remotely true? Let me be clear, the job of accurately measuring the value being realized from IT investments belongs to everyone, not just the CIO. However, this benefit realization phenomenon or lack thereof only proliferates all the things CIOs don't want to be. Serious CIOs should have benefit realization on their agenda in a big way.

The Benefit Realization Imperative

Benefit realization is about the proactive forecasting, management and measurement of financial, operational and strategic benefits being realized. It's about driving accountability for IT results across the organization. And it's in this role where the CIO can be the greatest advocate and most effective.

Let's look at this brief case study on how to build the business case. One Fortune 500 industrial manufacturer established a best-in-class IT investment management process. The process is an amalgamation of this company's rich history in Six Sigma and their belief that technology can revolutionize their industries, core business processes, and internal functions.

The company requires that each investment opportunity has a business case that includes a detailed view of the hard benefits, such as revenue benefits, working capital reductions and productivity cost savings. But, more important, it also requires that each business leader build these benefits into their operating plan to ensure that they are committed to delivering.