The key performance indicators (KPIs) that roll up to a CIO are — and should be — a strategic priority for any organization interested in digitally transforming itself. Measuring KPIs is a metrics-driven approach that has proven effective for every level in a company, including IT. But the business ecosphere is full of KPIs. Which ones should CIOs care about in 2021, and why?
KPI #1: Utilization
Utilization is more than bandwidth and load, it’s a revenue driver. As organizations embrace the additional complexities of a dispersed workforce that leverages cloud and hybrid models, utilization is increasingly important for these complex end-to-end architectures.
Utilization can be a difficult KPI to measure. The first rule of thumb we recommend is determining how utilization fits within the constructs of your business strategies. The goal of utilization should be to measure not only human performance, but also the adequacy of your technology tools. This is primarily because enterprise IT sometimes has a reputation of being costly, having unsuccessful deployments, and underutilizing available tools. Measuring IT tools for their impact on service lines and business strategies helps CIOs understand which initiatives are most successful.
From a human perspective, the IT utilization KPI should track project-related billable hours — even on internal projects. In effect, you’re trying to reproduce utilization metrics leveraged by pay-to-play engineering firms. It’s a good model to consider, with a goal of 70% higher utilization for your internal teams.
KPI #2: Time to deploy
Time to deploy should be business-centric. IT initiatives should extend beyond their value to the tech team but should be corralled within the parameters of a business use case. So, the KPI that will matter in 2021 is the time to deploy to a specific business goal.
From an IT perspective, this means tracking updates, feature adds, and general technology improvements. These metrics go beyond justifying the effectiveness in your teams. An increase in the time to deploy could signal anything from an imbalanced or overloaded IT team to unclear or changing requirements from business users or stakeholders. For example, the time between a reported outage and ticket resolution is a critical KPI to measure. Tracking the frequency of deployments is also a good KPI for CIOs. These numbers could lead to a process improvement discussion, such as whether workflows are being automated whenever possible or whether your teams should switch to a shorter sprint cadence (e.g., as in Agile methodologies).
Above all, the time to deploy metric, along with the utilization KPI, will help CIOs determine which teams, processes, and technologies are delivering real value toward corporate business and strategic goals
KPI #3: Revenue generation vs. costs
When IT KPIs and deployments are associated with a business use case, there is revenue associated with tech. Measuring real revenue against costs will not only keep you honest, it also will continue to show your value. But how can you quantify value in IT if it isn’t tied to an external revenue-generating product?
Ideally, you start with IT expenses as they relate to revenue generation. Do you know your goals for IT costs as a percentage of revenue? Set a baseline and carefully monitor spikes to determine where cost centers are located. Typically, the cost of IT is increasing, so tracking this metric will help you pinpoint the causes and potentially reduce them. This KPI also will indicate how effective your IT resources are over time. In addition, you can and should track:
- The benefits to management and other stakeholders of your IT team. Do this by reverse engineering revenue generation or benefits of the technology your IT team supports. For example, IT helps improve the customer experience by improving your corporate website where customers submit help tickets. Determining the cost of maintaining the website versus the potential revenue generation is one way to show ROI.
- Speaking of showing ROI, the KPI should look at organizational gain from any new or ongoing IT investments. The cost of these tools is pretty easily measured by taking a technology’s expected revenue and subtracting the cost of the tool. Divide the result by the investment’s cost and multiply by 100 for a typical ROI for that IT project.
- Also be sure to look at net present value to calculate the rate of return over time.
- Finally, look at employee productivity. This metric is tough to quantify, but you can consider time gained on deployments or trouble ticket resolution.
The goal of developing KPIs for your IT team must be to show the business value of their services. When CIOs measure KPIs, they show net present value, gains in employee productivity, the benefits of technology stacks, and much more. Ultimately, KPIs demonstrate the impact on the corporate bottom line.
The Windsor Group Sourcing Advisory specializes in helping organizations quantify value across the enterprise. If you’re a CIO struggling to quantify your digital transformation, we can help. Contact us to find out more.