INTERNAUT: The 'value driver' and the IT project
- By Shawn McCarthy
- Jan 31, 2006
Shawn P. McCarthy
The term value driver
gets tossed around quite a bit these days when government IT managers discuss new project proposals. The term is particularly popular now that the Office of Management and Budget is requiring new project proposals to include a detailed return-on-investment analysis.
But a value driver should not be confused with ROI. Value drivers are measurable operational variables which, when changed, can have an impact on one or more assessable values. Such variables can include cost savings, time savings, staffing adjustments or service improvements.
Think of it this way: If ROI is a key goal when embarking on an IT project, value drivers are the things that will help you get there. But judging exactly how value is driven, and how it should be tracked within a government agency, can be a challenge. Here are some things to consider:
- When the value of a change within an organization can be accurately measured, it can be predicted and repeated. (Example: If replacing a specific type of server leads to a specific level of cost savings, the numbers can be applied to multiple servers across the enterprise.)
- Since not all value drivers can be pursued, the ones with the highest payback should receive top priority. If possible, agencies should establish enterprisewide value maps that can help them track all value initiatives across their organizations.
- Agencies should attempt to construct a decision tree of value drivers. They can establish specific metrics for performance improvements and link them to strategic agency goals. This will establish a rough set of rules that prioritize and elevate specific projects that are deemed high-value. It can also assure that projects are plugged into the agencywide (or governmentwide) IT governance models and help assure that an agency's infrastructure is increasingly matched to the objective of its service delivery.
After value drivers are finally documented, agencies can conduct an ROI analysis for each. They can decide which has the greatest impact on performance, which is the easiest to implement and which helps the agency move toward governmentwide IT requirements or enterprise architectures.
Business process stakeholders should be included in these discussions, with the understanding that they are expected to provide input on 1) cost elimination, 2) improved operational performance and 3) ideas for driving new business (for example, turning an IT cost center into a profit center by agreeing to handle services for other departments).
What's more, all stakeholders must be willing to engage in discussions that will deal with agency asset management and potential liquidation.
Government IT managers who are looking to gain funding for new IT projects need to learn as much as they can about value drivers. By understanding what value drivers are, and how they influence not only ROI, but overall agency performance and long-term goals, government IT shops can better manage their long-term project initiatives.Former GCN writer Shawn P. McCarthy is senior analyst and program manager for government IT opportunities at IDC of Framingham, Mass. E-mail him at email@example.com.