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A Buyer's Guide to IT Value Methodologies

A Buyer's Guide to IT Value Methodologies

It's entirely possible to quantify, qualify and prioritise the ways IT contributes to the bottom line. Here's a roundup of several tools to help you do just that

TOTAL COST OF OWNERSHIP(TCO)

If you're already too cost-focused, TCO will just dig you in deeper."

Nuts and Bolts: TCO is an efficiency measure best used for helping service-oriented departments like IT squeeze better price and performance ratios out of key business processes such as operations, disaster recovery, change management and tech support.

Responding to a client query in 1986, Gartner's Bill Kirwin and others set out to calculate the ongoing costs of procuring, administration, set-up, moves/adds/changes, tech support, maintenance, peer support, downtime and other hidden costs of owning a PC. "We said: let's take a holistic view of costs across enterprise boundaries and over time," says Kirwin, now vice president and research director at Gartner (US). "When we added it all up, it was pretty surprising. Nobody believed the numbers at first, not even internally at Gartner."

They do now. TCO has become a way of life for many technology managers who like its dispassionate analysis of new products and upgrades. Hardware manufacturers can increase sales by building TCO-reducing features into their products that reduce maintenance and support costs.

Word of Mouth: TCO does an excellent job of providing a current cost benchmark, and it works well for analysing a narrow function or series of functions. When combined with best practices benchmarks, it can make a good framework for assessing and controlling IT spending. TCO does not assess risk or provide a way to align technology with strategic and competitive business goals.

Even Gartner, which developed TCO, acknowledges it isn't a silver bullet, but rather an efficiency metric that works well when plugged into the financial perspective of a Balanced Scorecard or other qualitative methodologies. Gartner is working on a broader version of the methodology called Total Value of Opportunity (TVO) that has a greater emphasis on investment performance.

Time and Money: Between eight and 16 weeks; anywhere from $30,000 to $50,000 on the low end.

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