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How CIOs quantify the value of technology

Quantifying the value of IT can be tricky, but it’s a critical part of a CIO’s job. In this installment of our CIO Voices series, two IT leaders share their strategies for quantifying the value of IT in their organizations.

At the SIMposium 2014 conference in Denver earlier this week, IT leaders discussed the challenges they faced as they made the transition from the chief of IT systems to a full-fledged member of the C-suite. The panel, entitled "CIO Panel: Earning a Seat at the Table," included John Shellenberger, VP and CIO at Johns Manville, a manufacturer of insulation, roofing materials and engineered products; Ian Patterson, CIO at Scottrade, an investment company that offers brokerage and banking services; and Patricia Coffey, senior vice president at Allstate Insurance, which offers auto, home and life insurance, and is also the third largest personal insurer in the United States.

In addition to answering questions from moderator Mary Sumner, professor of CMIS and academic lead for the SIM Management Council, audience members, many of them CIOs themselves, were given the chance to ask questions. Here, Patterson and Coffey weigh in on a question from the audience about how their organizations measure the value of technology.

One takeaway? Keep the business close at hand when measuring IT value.

Are you being asked to quantify the value of information technology to the organization instead of just bringing ideas and keeping it running? If so, how are you going about doing that?

Ian PattersonIan Patterson

Ian Patterson: My technology committee is headed by a member of the board. The way we're broken down is we have a holding company and we've got two presidents: one for the broker side of the business, one for the bank side of the business. They both sit on the technology committee and every year when I go into the budget, we look at basically four key areas. We look at my support number for the year, we look at my business enablement number for the year, [we look at] the one that a lot of people don't look at … our cost of regulatory on an annual basis, and then I look at my innovation. So I actually break it into four pieces on an annual basis with the business, and the business agrees to what percentage I'm going to work in each of those. For example, we moved from about 10% in innovation last year to about 12% this year. … So we break it out in those four key areas and work with it from that perspective; and I have to present on it every quarter.

Patricia CoffeyPatricia Coffey

Patricia Coffey: Yes we are, and it's not easy. I believe there is an APC [Advanced Practices Council] report on the SIM website around this topic, because a lot of people are looking at different ways to figure out value. Some of them are probably easy, right? You can tie it directly to revenue or cost, but we tend to look at IT, in the past, as cost reduction. I think at least for us anyway, insurance [is] harder now because the reality is that technology has completely changed our business. Think about Internet of Things and big data -- we've been playing with big data for years. When you think about our ability to profile risk and individual wealth, when you think about devices talking to devices and how that's going to help us profile risk and whether or not there's even a need for insurance if your car drives itself and your house repairs itself with a -3D printer … no one knows what insurance is going to be. So I think there is definitely a focus on understanding how you're driving [IT] value, but I do think there's also an element, depending on your industry, where sometimes you just have to take a little bit of a leap of faith and try some things … and say, 'We're going to test and learn some things here, because our industry's going to shift.'

And I would add just one other thing: I rarely do anything that I don't have a business partner with me. What I do is I figure out that even if it's an upgrade or it feels more like an infrastructure update, I figure out how to tweak that last bit of business value out of it. … I try to find that piece of business enablement or some sort of a benefit for the business, and I make them sign up for that part of the benefit. So very rarely do I do anything where I haven't found another piece of value."

Let us know what you think about the story; email Kristen Lee, features writer, or find her on Twitter @Kristen_Lee_34.

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How do you quantify the value of IT within your organization?