Measuring IT Value: Show Me the Money

by Jamie Macgregor, March 16, 2015
Operations/ Benchmarking
Global

Abstract

Early in 2015, Celent asked a panel of CIOs a series of questions about how they measured IT value and how their IT budget was constructed to deliver it. The aim of the survey was to extract some meaningful and simple IT benchmarks that could be applied to evaluate performance of an IT function.

In the new report Measuring IT Value: Show Me the Money, Celent explores the make-up of the typical insurer IT budget with a view towards understanding how value is measured. Areas of focus within the report include:

  • IT budget construction.
  • Metrics used to measure value.
  • Funding of internal IT projects to generate value.

Our analysis is based upon a survey of 46 insurers of varying size and line of business, primarily based in North America.

For many insurers, the approach towards IT budget construction and the measurement of IT value remains rooted in a traditional approach of centrally planned budgets and top-down whole of portfolio metrics that can often mask where IT value is being delivered.

“Many insurers continue to budget for IT as a fixed cost that has to then be allocated out across the business,” says Jamie Macgregor, Senior Vice President of Celent’s Insurance practice and author of the report. “As they move towards a greater reliance on external services and usage-based models, the traditional ways of budgeting for IT and measuring value will also need to adapt to become attuned with capacity and more aligned with an outcome-based model.”

Looking over a two to five year horizon, Celent believes that measurements of IT value will mature and shift towards efficient outcomes where cost, time, and value are used to rate performance of an IT function, enabling a more informed debate over where to spend scarce IT dollars.

Furthermore, Celent expects this movement to accelerate as insurers change the shape of the IT organization to take advantage of new outsourced and cloud-based services, and the corresponding inevitable shift towards greater levels of operating expenditure.

This 20-page report contains one table and nine figures.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

 

Key Findings

1

Introduction

2

 

Key Research Questions

2

The Typical IT Budget Shape

3

 

Direction of Travel

3

 

The Typical Shape for IT Budgets

3

 

Allocating the Cost of IT

5

Measuring IT Value

7

 

How Well Is IT Delivering to Expectations?

7

 

The Classic Measures

7

 

The Scorecard

9

Investing in IT

11

 

Allocating Funding to Internal IT Projects

11

 

What Types of Initiatives Does a Typical IT Portfolio Contain?

12

Conclusion

13

Appendix: Survey Participant Overview

14

Leveraging Celent’s Expertise

15

 

Support for Financial Institutions

15

 

Support for Vendors

15

Related Celent Research

16

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