In my quest for the Nobel prize for IT Paradigmology, I’ve been trying to come up with equivalent of an E=MC2 for IT. The topic that I most recently had in mind is an expression for the value that organizations get from their investments in information systems. This post takes you through my thinking and gives you five questions that probe the value that you’re currently getting from your information systems.
Benefits
My thinking is that there is value potential in the information systems, but that value only is realized when the systems are used. So I started off with V = IS x U where V=value, IS=information systems and U=use. Then I broke down ‘information systems’ into various components. Firstly, there’s the combination of hardware, software and data that is needed to fulfil a certain function. Let’s call this functionality, or F for short. Then we have the ease with which the functionality can be used. This is influenced by the design of the user interface, and by the operational behaviour of the information system. By operational behaviour I mean availability and performance. It was tempting to combine design and operation behaviour for the sake of simplicity into ease of use, but I thought it better to treat them as separate factors (D for design and O for operational behaviour). And finally we have to consider how well the information system is used, because that’s where value is actually realized: use (U). This gives us a simple equation to express the benefits (B): B=FDOU.
Total cost of ownership
Now we have to figure cost (C) into the equation. The cost of realizing, running and using, and, eventually, decommissioning the information system. Total cost of ownership. The higher the cost, the lower the value, so V=FDOU-C.
Misuse and abuse
Thinking about cost reminded me to consider abuse of the information system such as denial of service and loss or theft of data. I make the distinction between abuse and misuse. Abuse is associated with the intent to do harm, and misuse with unintentional incompetence. I’m including misuse in use. Use is the degree to which the potential benefits are realized, the potential benefits being represented by the functionality and the ease of use. Misuse just results in a lower value of use. As for abuse, it clearly detracts from the value, so it’s another negative component, just like cost. This gives us V=FDOU-C-A. Not quite as simple and catchy as E=MC2 but it could have been worse.
Theoretical drivel
Of course this is just theoretical drivel unless you can apply it to a practical problem. My intention is that it helps you improve the return of investment in information systems by answering the following questions and identifying potential improvements.
- Is the information system’s functionality (F) aligned with the organization’s goals, e.g. selling more, better, cheaper or different products?
- Is the functionality easy to use, both from a user interface design (D) perspective, and in terms of operational availability and performance (O)?
- Is the information system used effectively and efficiently – in other words is the potential value actually realized?
- Is the information system subject to abuse such as denial of service and loss or theft of data?
- Is the total cost of ownership appropriate, given the benefits and risks?
Value leakage
In his talk at the Dutch Service Manager Day on 17th March 2016, Peter Lijnse coined the term ‘value leakage’. This is the value that is lost at various stages during the whole lifecycle, for instance during specification and design when factors such as culture are not taken into consideration; during construction when the system is not built according to specifications; during operation when outages occur; and during use when the system is misused or abused. I wondered whether I could include value leakage into the equation but concluded that it’s in implicit part of functionality, ease of use, and use. To take the example of functionality, you could say that ‘gross functionality’ represents what could have been built, but leakage during specification and construction resulted in ‘nett functionality’, which is the actual functionality that is represented in the equation. So although it’s not in the equation, it still is an important phenomenon to be considered. And anyway, I want to keep the Nobel prize for myself.
