Measuring ROI and Rewarding IT Executives based on their Contribution to Profits


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Presented by Alvin Goh, Senior Consultant, UXC Consulting at ISS-UXC Seminar: Move IT from Cost to Value Centre using IT Service Management and COBIT on 25 July 2014.

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Measuring ROI and Rewarding IT Executives based on their Contribution to Profits

  1. 1. Measuring ROI and rewarding IT executives based on their contribution to profits Alvin Goh July 2014
  2. 2. The following best-practice frameworks are/may be referenced during this presentation: ITIL® ITIL® is a registered trademark of the Cabinet Office The Swirl logo™ is a trade mark of the Cabinet Office COBIT® COBIT® is a registered trademark of ISACA Copyright Acknowledgements
  3. 3. Agenda ROI – How to measure? Tool – Don’t be a fool Reward – A part of Governance
  4. 4. Terminology o Incident Management – Restore service as quickly as possible following an unplanned interruption. o Problem Management – Stop incidents from reoccurring. o Change Management – Prompt, efficient & risk-aware handling of changes requested by the business.
  5. 5. Company A (Incident Management) o Last year, 4 Major Incidents caused total of $100,000 in opportunity costs. o Mainly due to confusion on who does what, when, where, how. o After implementing ITIL, 4 Major Incidents only caused $40,000 in opportunity costs. o Savings due to Incident Management, = (cost of business impact before) – (cost after ITIL implemented) = $100,000 - $40,000 = $60,000
  6. 6. Company A (Incident Management) o Previously, average outage of Major Incident is 5 hours, 1,000 employees affected. o After implementing ITIL, average outage reduced to 2 hours. o Further savings due to Incident Management, = (amount of downtime before) – (amount after ITIL implemented) = (5 x 1,000) – (2 x 1,000) = 3,000 manhours saved o Assuming average manhour is $100, = 3,000 x 100 = $30,000 saved per Major Incident = $30,000 x 4 = $120,000 saved per year (4 Major Incidents a year)
  7. 7. Company B (Problem Management) o Last year 5,500 Incidents per month, each taking an average of 5 hours to resolve. o After implementing ITIL, Incidents reduced to 4,000 a month. o Savings due to Problem Management, = (average duration of resolving an Incident) x (number of Incidents eliminated) = 5 x (5,500 – 4,000) = 7,500 manhours saved o Assuming average manhour is $100, = 7,500 x 100 = $750,000 saved per month = 750,000 x 12 = $9,000,000 saved per year
  8. 8. Company C (Change Management) o In 2013, there were 3 Major Changes that failed and needed to back out, causing the company $100,000. o After implementing ITIL, there were less failed Changes costing a total of $30,000, and the amount of rework was reduced. o Savings due to Change Management (due to failure & rework), = (cost of failed Changes previously) – (cost of failed Changes after) = 100,000 – 30,000 = $70,000
  9. 9. Agenda ROI – How to measure? Tool – Don’t be a fool Reward – A part of Governance
  10. 10. Excel - Baaaad
  11. 11. Tool - Good o Meticulousness – Remove human error. o Automation – Reduce tedious work. o Clarity – Easier to present a clearer view.
  12. 12. Our Expectations of a Tool…
  13. 13. A Fool with a Tool…
  14. 14. Tool Customisation…
  15. 15. Watchouts! o Process dictates how tool should work. o Configure, not customize. o Use MoSCoW analysis for requirements.
  16. 16. Agenda ROI – How to measure? Tool – Don’t be a fool Reward – A part of Governance
  17. 17. IT Governance © 2012 ISACA® All rights reserved.
  18. 18. Stakeholders
  19. 19. Benefits of Happy Employees
  20. 20. Gainsharing o Gainsharing measures performance through a pre-determined formula and shares the savings with employees. o Works best when company performance levels can be easily quantified and in a work environment that is based on openness and trust. o Rewards only performance improvement and payouts are self- funded from savings generated.
  21. 21. Benefits of Gainsharing o Fosters a culture of continuous improvement o Enhances employee focus and awareness o Increases the feeling of ownership and accountability o Enhances the level of involvement, teamwork and cooperation o Supports other performance improvement efforts and helps promote positive change o Promotes morale, pride, and more positive attitudes toward the organization
  22. 22. Take Away o Always try to measure IT in a way that the business understands. o Tools help. But be careful. o Reward your folks!
  23. 23. Thank You! For further info on related course/s, please see: Alvin Goh Senior Consulting