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Definition of IT Performance Measures As information technology is further integrated into business and in fact "becomes" the business, it is critical that an enterprise's IT assets be fully, "fluidly" aligned with business needs and actively managed from an investment perspective (risk, yield, benefits, etc.), instead of solely from a cost-side perspective, as is widely practiced today.
From this perspective, the financial services metaphors of "portfolio management" and perhaps "fund management" are applicable and essential to the management of new-age IT.
Let's define what exactly we mean by Information Technology Performance Measurement. It is an analytical process by which a program or project objectively measures how it is accomplishing its mission through the delivery of IT products, goods, and services.
Types of Performance Measures
1. Financial Indicators
2. Efficiency Measures
3. Resource Inputs
4. Outputs/Financial Products
5. Internal Measures of Quality of Products/Services
6. External Customer Needs
7. External Customer Satisfaction
8. Work/Activity Level
9. Timeliness of Product or Service
Performance Measures Model
Principles of IT performance measurement The literature identified key principles for developing performance measures of IT
·Leading organizations manage IT projects as investments and rank projects based on maximizing returns and minimizing risks. After initial choices are made, organizations continue to manage and reevaluate IT investments in light of changing priorities in mission and budgets.
·Leading organizations integrate IT funding decisions with overall strategic business planning and direction. Choices among investments are made based on contribution to critical, broad, long-term organizational objectives. The organization's strategic goals are used to plan IT programs.
Agencies should therefore develop IT performance measures which are directly related to the strategic objectives of the units it supports. "Internal activities, no matter how efficiently performed, are worthless unless they are contributing to the functioning of the enterprise."
·Users should be viewed as the customers. They should be involved in identifying goals, redesigning work processes to meet these goals, and defining the critical information and technology to support work processes.
·Making analytic processes consistent across the organization makes it easier to identify opportunities to develop IT that can serve more than one function in the organization. A unifying framework for all measures is helpful.
·Developing process improvements without integrating them can lead to fragmentation. This makes it hard to share the benefits of technology throughout an organization and can lead to the duplication of systems.
·To improve performance, information technology must be used to redesign or streamline the work process.
·IT measures should include positive measures. Peers and supervisors frequently use negative factors (problems, complaints, cost overruns, etc.) as the primary means of assessing performance. This leads to a negative bias.
·The total value of information technology is greater than the sum of its parts. For example at a university, the value of a departmental e-mail system is enhanced if the entire campus is also on the network, and is greater still if everyone is connected to the Internet. There is a multiplying or synergistic effect that is hard to quantify.
·Cost measures need to include not only the cost of acquiring the technology but also the costs of technical support and training. More sophisticated technologies usually call for more sophisticated, and more expensive, training, support, and peripherals, and also introduce new sets of incompatibilities and obsolescence of peripherals. Once a new system becomes fully functional, there is usually an increase in the number of users and the types of usage.
Challenges in developing IT performance measures Most sources stress the complexity and difficulty of measuring the impact of IT on organizational outcomes. Among the factors mentioned are the following:
·As IT costs and resources are distributed throughout organizations, it becomes more difficult to assess whether a system performs as intended.
·As information systems alter business processes, preexisting measures of productivity become obsolete.
·Customer satisfaction measures, whether qualitative or quantitative, are unfamiliar to most IT managers, and outside the direct control of the IT department. However, these are the measures understandable to the user community.
·Cost estimates are difficult to make. Estimates of the life-cycle cost of the technology are moot if the technology becomes obsolete. It should be noted that the life cycle of new technologies is getting shorter making it more difficult for researchers to maintain the necessary competitive edge.
·The cost of training staff needs to be factored into the cost of the technology. In some cases, it may exceed the cost of the technology.
·Each successive generation of information technology brings new levels of performance and functionality making it difficult to compare the costs and outcomes of the new systems with those of older and now obsolete systems.

The Performance Measures Life Cycle
Planning and Measuring IT performance is a dynamic process with life cycle phases shown below. This is significant because today's environment is different and complex. Traditional measurement systems may give misleading signals to program managers especially in trying to assess information technology's contribution to the organization's mission. Frequently, there can be a variety of variables affecting performance of information systems. The five phases of the planning and performance measurement cycle are portrayed here:
·strategic planning
·creating the performance indicators
·implementing projects and programs
·refining measures
·integrating the management decision process

Integrating Strategic and Performance Plans for continuous improvement
After performance measures are collected, refined, and analyzed, it now should be integrated into the management decision process. The task moves to how to use performance measure effectively. The Program Manager and the team (appropriate staff and users) evaluate the results.
It is important to understand that this performance measurement cycle is a continuous process of improvement and decision-making.
Integrating management decision processes can also be described in the diagram. Strategic plans (e.g. agency or information technology plans) should be accompanied with performance plans and evaluated periodically to measure progress in terms of effectiveness, efficiency, or economy.

Establishing metrics is easy, establishing the right measures is more difficult.There are generally four uses of performance measures:
1. Measure products/services
2. Manage products/services|
3. Assure accountability
4. Make budget decisions

Things To Be Cautious About In Measuring Information Technology
The problem(s) of measuring the business value of IT will be a core management issue in the early years of the IT era. The current context is one of growing costs and limited or no evidence of payoff. In the past we have frequently assumed that IT produces value. But at what cost? Is the return on investment worth the government's dollar investment? Raines Rules now apply. It is a new environment. Congress and the taxpayer now want results from our investment of dollars into information technology.
However, we must be careful because computers may not measurably improve productivity as the result of four factors:
1. Measurement error. Conventional measures do not properly account for the true inputs and outputs of information-using industries. We now look to other measures and approaches such at the Balanced Scorecard.
2. Lags. Time lags between expense and benefit are not properly accounted for in current measures. A suggested approach is the earned value method for capital planning.
3. Redistribution. IT is used to redistribute the source of costs in firms; there is no difference in total output, only in the means of getting it.
4. Mismanagement. The lack of explicit measures of the value of information makes it vulnerable to misallocation and overconsumption by managers. As a result, proper performance measurement techniques will play an increasing role for program managers and investment review boards.

IT General Performance Measures
Objectives
Sample Measures
IT Strategic Measures
Enterprise Mission Goals % mission improvement (cost, time, quality, quantity attribute to IT solutions and services
% planned IT benefits realized
% IT strategies fully matched to enterprise strategies
Portfolio Analysis and Management % IT portfolio reviewed and disposed
% compliance to approved IT solution deployment
% reusability of core modules
Financial and Investment Performance % total IT costs by major asset categories (hardware, software, personnel, facilities, management)
IT budget as % of operational budget and compare to industry average net present value, internal rate of return, return of investment, return on assets percentages (aggregate or by project)
IT Resources Usage % databases that can be shared
% hardware/software with interoperability capabilities
Customer Measures
Customer Partnership and Involvement % cooperative customer and IT applications design
% joint development service level agreements
% customers attending IT investment meetings
Customer Satisfaction % customers reporting full use of applications
% customers satisfied with IT application design
% customers satisfied with IT maintenance and support
% of problems resolved within target time
% products launched on time
Taken to fulfill service requests
Business Process Support degree to which IT solution support process improvement plans
degree to which IT aids process analysis
degree to which IT solutions can adapt to new requirements
incremental cost to transfer application to new hardware platform
Internal IT Business Measures
Architecture Standards Compliance % procurement exception to architecture standards
N variations from standards detected by review and audit per year
% increase in systems using standard architecture
Project Performance % projects on time, on budget
% projects using standard methodology for systems analysis and design
N backlog on enhancement and maintenance requests
Infrastructure Availability % computer availability
% applications availability
on-line system response time
IT Training Measures
Workforce Competency and Development N staff trained by skill area
% staff training uses new technologies and techniques
% staff professionally certified
% IT budget devoted to training and staff development
Employee Satisfaction % employees satisfied with the existing technical and operating environment to deliver quality products or services
% employees satisfied with training
% employee turnover by function
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