Learning Outcomes
4.1. Compare efficiency IT metrics and effectiveness IT metrics.
4.2. List and describe five common types of efficiency IT metrics.
4.3. List and describe four types of effectiveness it
metrics.
4.4. Explain customer metrics and their importance to an organization.
Measuring the Success of Strategic Initiatives
Measuring Information Technology's Success
IT has become an important part of the organization's strategy, competitive advantage ana profitability.
IT now has to operate like other part of the organization, being aware of its performance and its contribution to the organization success and oppotunities for improvement.
The first thing managers need to understand about IT succes is that it is icledibly difficult to measure.
-Key Performance Indicators [KPIs]are the measurements that are tied to business drivers. Metrics are the detailed measures that feed those KPIs. Performance metrics fall into a nebulous area of business intelligence that in neither technology nor business-centered, but this are requires input from both IT and business professionals to find sucess.
Efficiency and Effectiveness
Efficiency IT metrics:measure the performance of the IT system itself including throughput, speed, and availability.
Effectivenes IT metrics:
measure the inpact IT has on business processes and activities including customers satisfaction, conversion rates, and sell-through increases.
The two efficiency and effectiveness are definitely interrelated. However, success in one area dos not necessarily imply succes in the other.
Benchmarking - Baseline Metrics
- Benchmarking is the process of continuously measuring system results, comparing those results to optimal systems performance, and identifying steps and procedures to improve system performance.
There is a high degree of correlation between government and efficiency and effectiveness, although it is not absolute.
The Interrelation of Efficiency and Effectiveness IT Metrics
While these efficiency metrics are important to monitor, they do not always guarantee effectivenes. Effectiveness IT metrics are determined according to an organization's goals, strategies, and objectives.
Be sure to consider the issue of security while determining efficiency and effectiveness IT metrics. Purely from an efficiency IT metric point of view, security generates some inefficiency. From an organization's business strategy point of view, however, security should lead to increase in effectiveness metrics.
Metrics for Strategic Initiatives
What is a metric?
A metric is nothing more than a standard measure to assess performance in a particular area.
More business professionals are familiar with finantial metrics. Different finantial ratios are used to evaluate a company performance.
Most common financial ratios include:
- Internal rate of return [IRR]
- Return on investment [ROI]
- Payback method
- Break - even analysis
Most managers are familiar with financial metrics but unfamiliar with information system metrics. The following metrics will help managers to measure and manage their strategic initiatives:
- Website metrics
Most companies measure the traffic on a website as the primary determinat of the website's success. However, heavy website traffic does not mean it has large sales.
A web-centric metric is the measure of the success of the web and ebusiness initiatives.
- Supply Chain Management [SCM] Metrics
A supply chain management can help an organization understand how it's operating over a given time period. Supply chain measurements can cover many areas including procurement, production, distribution, warehousing, inventory, transportation, and customer service. To succeed using the supply chain is by measuring the following areas:
- Back Order
- Customer Order promised cycle time
- Customer order actual cycle time
- Inventory replenishment cycle time
- Inventory turns[inventory turnover]
- Customer Relationship Management [CRM] Metrics
The metrics to track are no more than seven out of hundreds possible.
- Business Process Reengineering [BPR] and Enterprise Resource Planning [ERP] Metrics
Business Process Reengineering [BPR] and Enterprise Resource Planning [ERP] Metrics are large organization initiatives. Measuring these type of strategic initiatives is extremely difficult. One of the best methods is the balance scorecard.
- Balance Sorecard:is the management system, in addition to a measurement system, that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcome in order to continuously improve strategic performance and results.