What exactly does “business value” mean…..?

December 7, 2009Blog Standard

IT departments, Businesses and vendors alike use this term very often, so often that it looses its meaning…how does the IT add value to business.

There is no commonly accepted definition of the word business value since it is so open to interpretation…

So am attempting to define this as holistically as possible….

In the context of enterprise IT, the business value of any initiative, technology, process, a business unit, a service, or a vendor is a measure of its criticality to the core business. This criticality can be further defined in terms of the impact to the 7 essential dimensions of the business. These dimensions are

Revenue/Cost/Risk/Brand Value/Experience of End Customer/Sustainibility/Employee Satisfaction.

Any initiative which can positively impact any of the above dimensions in a significant and tangible manner, will be taken as having delivered positive business value.

Reducing Cost by automation is the easiest part where most of the IT initiatives have focussed on. No examples are needed here..so that is well understood.
An example of revenue impact is a Telco. If tomorrow the IT team helps a telco provider set up a cloud platform and offer storage on demand and computing on demand to its customers, then it helps create new revenue streams thus adding value to business.

The security products and services for example are all about reducing risks to busienss.

Impacting experience of end customers or impact is normally achieved through Applications or Business Process led services. A travel website can signficantly enhance customer experience which further impacts revenue by deploying efficient technologies both on applications and infrastructure side.

Sustainibility is new parameter and is becoming increasingly important dimension. If IT helps reduction in the the net consumption of energy and supports net production of energy, it can improve the overall sustainbility of the business.

Brand Value is very intangible and IT cannot support directly in this area unless you include the web marketing as a tool. However in IT led businesses like web based businesses, IT can make animpact in enhancing the brand value by deploying latest technologies as efficiently as possible.

Employee Satisfaction is another important dimension which is the most closest link to internal IT. Any increase in the satisfaction of the internal employees by increasing their productivity and efficiency has a direct impact on overall business value.

Does this make sense?

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Good break up of value Anirudh!

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