In January 2017 I had the opportunity to speak at the itSMF annual conference on the topic of the IT QUALITY INDEX – “How Good Is Your IT?”. After my presentation, I was invited to coffee by a CIO who expressed his interest in this topic. He told me that he was currently having discussions with his executives about if the IT in their organisation was good or bad and expensive or under-priced. After our meeting, I mailed him an overview of IT quality measurements and we agreed to follow up. A few days later he reached out to me and I was invited to a meeting with him and his CEO to discuss the points of interest directly.
CEO:
Our IT deliver services to our daughter companies and we also pay for services provided by our mother company which is located in another country. Our concern is that we are not sure if the overall IT costs we are paying and the prices we are charging to our daughter companies are in line with similar IT organisations. We need an external assessment and benchmark.
Q4IT:
Price levels are dependent on many aspects such as size, quality level and context – ie. Salary levels that are significantly different between companies. This makes a comparison of pricing, not an easy process and those differences need to be reflected in the final report. There is no one right cost of IT that is valid for everyone.
CEO:
Yes, so we are searching for a solution which takes into account all of these aspects – quality and costs, type of business, geography. It is also not our aim to have the lowest costs for IT, but to have costs similar to others in our industry.
Q4IT:
This is a reasonable approach as low cost IT is usually reflected in the lower levels of structure, compliance and flexibility of the IT services provider. Our observations suggest that the lowest costs in IT are found in companies that are not well managed. In simple terms, there is a price tag for greater quality.
CEO:
Are you able to quantify the overall IT quality level not just the quality of a single IT service?
Q4IT:
Yes, and this is the major difference to other approaches which are driven by quantity metrics. Frequently used metrics, such as total IT cost per user, are missing fundamentally important information about the overall quality of IT. We call it single factor benchmarking where a single factor refers to costs per article measured. We encourage the use of two factor benchmarking which is a combination of costs and quality.
CEO:
So you need to quantify IT quality. How you do it?
Q4IT:
We measure the overall IT quality with the IT QUALITY INDEX approach. This means the analysis of 48 quality dimensions to enable us to get a good picture of the whole of IT. This is the starting point of our analysis. Once we know the quality factor then we perform benchmarking on cost levels with a reflection to the quality level. When we process both factors and put them into a chart we can compare IT costs against similar IT departments with respect to a similar quality level. This approach enables us to identify the IT organisations which are the most cost-effective, while cost efficiency is at the expense of a lower quality level. So, you won’t be benchmarked against IT organisations with low costs and low quality but against IT organisations with similar quality levels. In the final report, we provide a statement as to whether or not you pay and charge a reasonable price for IT quality based on the average of similar organisations of a similar quality. We have had projects where management stated that their ambition was to have “Better than average IT quality while having average costs”.
CEO:
Correct, this is also our aim for the future, but first, we need to know where we are now from a cost and quality perspective.
If this sounds familiar to you check out: http://www.itqualityindex.com/quality-manager-know-quality/
There are plenty of good metaphors to use when explaining cost and quality dependency. My favourite one uses watches.
“Imagine your organisation as a person – what type of watches would they wish to wear if the watch was to symbolise their IT? There are so many differences to think about – costs, features, reputation, resilience, image, modernity, … “.
