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  5. Measuring IT Value: Show Me the Money

Measuring IT Value: Show Me the Money

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16 March 2015
Jamie Macgregor

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.

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