An IT service department undertakes a range of different activities each of which may offer a different return on investment (ROI). Given the significant percentage of overall costs made up by staffing, the return may have a lot to do with staff grade and the nature of activities undertaken.
The approach is similar to the way in which a consultancy firm may identify activity that can be directly billed to clients. For routine activities, undertaken according to standard SLAs, the percentage of staff time going on providing a direct service to the customer (whether or not this is recharged) may be very high.
For innovation activity the picture may be quite different. Planning, setting up and managing a unique project takes time and much research and development activity may not translate into actual delivered products and services.
Activity in colleges and universities
In colleges and universities organisational structures and lines of management often incorporate both types of activity.
Many commercial organisations, who have undertaken this type of analysis, have tendered to hive off operations functions into data centres that are quite separate from innovation activities. The implications are clear: in looking to achieve greater efficiencies the prime candidates for shared services and/or outsourcing are the operational functions. These are also the areas with the highest ROI – leaving in-house IT departments with the higher-risk, lower initial ROI activities.
Any college or university that wants to make its use of IT a significant differentiator in terms of the experience it provides to its learners, may have to accept that its IT department spends a lot of time on research and development activity where initial ROI is not always guaranteed and where the benefits are significant but longer term.
Within innovation activities, levels of ROI will differ significantly between projects. The portfolio management infoKit, part of the P3M series, has a section on balancing your portfolio that looks at achieving the right levels of innovation and risk for your organisation. The programme management infoKit in the same series, looks at managing and measuring benefits. Both of these topics are of relevance in relation to determining what innovation activities an IT service department should undertake.
Whilst many organisations now require a business case to accompany any project proposal, few have genuinely joined this up with a portfolio management process that takes an enterprise view of benefits and a full cost approach to IT services. The advantages in doing so are very evident. Institutions have a finite budget – with a clear understanding of the cost of deliverables and a view of benefits from the perspective of the institution as a whole, it becomes possible to align projects to strategic priorities. It also becomes possible to judge whether a combination of small projects may deliver better ROI than one or two large projects and thus to optimise the portfolio as a whole.
By providing a consistent and transparent costing mechanism the IT department enables the business leaders to make these decisions for themselves.
Using enterprise architecture
This excellent presentation from Charles Sturt University in Australia (Bedwell 2006) describes how they used Enterprise Architecture to address a situation in which they had a backlog of approximately 60 person years worth of IT projects and come up with a means of prioritising projects according to enterprise processes and overall impact rather than organisational structure.
"In response to the imbalance between expectations and resources, and to the internal service provider being forced to make clients’ purchase decisions for them, some organizations have set up a ‘governance’ processes that engage clients in prioritizing the demands – often called a ‘portfolio management’ process. But without an understanding of the cost of deliverables, these committees cannot make fiscally sound decisions based on ROI. Instead, they rank-order projects. It’s all they have the data to do."
"Once it is understood which processes deliver real competitive advantage then greater consideration can be made of sharing those processes that do not."
Tinson, P. 2011 Driving Efficiencies
"It may be difficult to define how much of an identified benefit can be attributed to an investment in ICT, particularly when the ICT investment is in support of other changes (e.g. a changed business process, the redesign of a curriculum, etc). Many other factors, in addition to the ICT investment, may contribute to the delivery of the benefit, making it difficult to establish a direct cause and effect relationship between the ICT investment and the outcome."
Breslin and Cullen 2008
"… it takes time to learn how to design a new teaching method, and a comparative evaluation too early in its practice will undermine the chances of optimising it. Educational innovations do persist, for a variety of reasons other than clear short-term evidence of benefit, and then have the opportunity to improve over time and demonstrate their worth. By then the requirement for evidence has passed, and we still have no baseline for comparison with further innovation. …"