Measuring Value in IT Applications

Measuring Value in IT Applications

Tom Lamm PMP, PMI-ACP

The value of a software application is one of the most important of critical success factors, but in practice, one of the least measured. This is especially true of custom applications. Too often, businesses that would never think of making an equipment purchase without considering cost, value, and ROI will design, create, and implement a software solution without knowing how much value the system returned for the cost. Glaser (2009) describes the problem, “Rarely do organizations revisit their IT investments to determine whether the promised value was actually achieved.”

When purchasing packaged software, the value and ROI (return on investment) are considered from the outset. Evaluating a software purchase includes considering the product’s features and deciding which are required, nice to have, and unnecessary. If the product has too many features that are considered unnecessary, the purchaser may seek an option with fewer features and a lower cost, thus obtaining a better ROI.

The same considerations are often ignored in custom software. Value is often considered during design, and then ignored from that point on. Software projects are often evaluated using only two critical success factors: completed features and on-time delivery. The actual value returned for the investment is not on the list.

Measuring Software Value
Software value is measured by the financial gain it provides. It may be a report that provides more efficient analysis of information, an improvement to a process that increases the throughput of that process’s value-chain, or an improvement to call center software that decreases average talk time. The financial gain of each of these examples can be accurately measured and resulting ROI for the improvement calculated. Adding ROI to the list of critical success factors is a far more accurate measure of success than simply considering features and on-time delivery.

Project Management and Value
Traditional project management techniques can be very successful in delivering value, but it is not inherent to the process. In contrast, Agile project management considers value throughout the entire project. At the outset, the founders of Agile software management identified 12 principles, the first principle is “Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.” (Beck et al. 2001). The emphasis on value is inherent to Agile project management. Agile techniques restrict the work to only features that return value and use value as a primary factor when prioritizing features for development.

Value as a Measure of Project Success
Whether purchasing packaged software, or creating software using traditional or Agile techniques, it is vital to measure the resulting improvement. Determining ROI for software is just as important as it is for any other long-term investment.

Reporting that measurement helps the development team focus on cost and value, improving the resulting ROI. Glaser (2009) even suggests, “In addition to go-live parties, organizations should consider business value parties—celebrations conducted once the value of the project has been achieved”. Whether or not an actual party is involved, recognizing a project team that produced and delivered software that is of high value emphasizes the importance of considering value throughout the development life-cycle. And, doing so helps the development staff improve their delivery of value over time.

References

Glaser J. (July 2009). Strategies for Ensuring an IT Project Delivers Value Healthcare Financial Management 63 (7), 28.

Beck K. et al. (2001). Manifesto for Agile Development. Retrieved from http://agilemanifesto.org/principles.html