What's IT Worth? Reading List

FRAMINGHAM (05/01/2000) - For CIOs beleaguered by ever-shorter project cycles and never-ending deadlines, reading books about IT value may understandably fall by the wayside. After all, with speed as the new mantra emanating from the corner office, many CIOs figure they don't have the time to read much of anything (except CIO, of course) let alone books about an arcane and often slippery topic such as IT value. Yet when asked by CIO to recommend a reading list, consultants who make their living thinking a lot about IT value didn't hesitate to mention their favorites.

Ruben Melendez, CEO of Glomark, a Columbus, Ohio-based company that has developed its own version of an economic value methodology, suggests CIOs pick up a copy of The Balanced Scorecard: Translating Strategy into Action (Harvard Business School Press, 1996), by Robert S. Kaplan and David P. Norton, the fathers of the balanced scorecard approach. Melendez likes the book because it includes a discussion of traditional financial-evaluation methods (such as economic value added and return on capital) in the context of adding value through customer service, innovation, business processes, employee satisfaction and other important benchmarks.

While Melendez finds it useful to know about the traditional financial measures that are detailed in The Balanced Scorecard, at the end of the day they just tackle the tangibles. For help putting a value on the intangibles, Melendez recommends Intellectual Capital (Thomson Learning, 1998), by Annie Brooking.

(Not to be confused with Thomas A. Stewart's book, Intellectual Capital: The New Wealth of Organizations.) As the title implies, Brooking's book attempts to decipher the value of knowledge assets including such things as patents, brands and employee skills. Brooking not only explains why knowledge assets are so important, she also provides guidelines for how to measure their value.

As services director of Stamford, Connecticut-based GartnerGroup's return on IT investment service, Jeff Owen is well versed in the various financial models for determining the economic value of IT. To better understand the potential value of IT, Owen suggests Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology (Harvard Business School Press, 1998), by Peter Weill and Marianne Broadbent. Through case studies, the authors demonstrate how IT investments lead to market dominance. Along the way, the authors posit that IT investments should be thought of as a portfolio of assets and managed accordingly.

For insomniacs, Owen finds a couple of Paul A. Strassmann's heftier tomes useful. Top on his list is the 548-page The Business Value of Computers and the 426-page The Squandered Computer: Evaluating the Business Alignment of Information Technology (both published by Information Economics Press, 1990 and 1997, respectively.) To get up to speed with value methods that stray from straightforward cost-benefit analyses, Owen recommends The Information Paradox: Realizing the Business Benefits of Information Technology (McGraw-Hill, 1999), by John Thorp.

Owen likes this book because it prods readers to link IT investments with business results. Another book that encourages readers to think in new ways (specifically in terms of speed) is Business @ the Speed of Thought: Using a Digital Nervous System (Warner Books, 1999), by Microsoft Chairman Bill Gates.

"It doesn't give readers any [value] methodologies," Owen says. "But it does provide good background about the dynamics of business today."

For CIOs concerned with proving the value of legacy systems such as data warehouses, Bradley Geddes, general manager of Decisionism's e-business performance management in Boulder, Colo., recommends Corporate Information Factory (John Wiley & Sons, 1997), by W.H. Inmon, Claudia Imhoff and Ryan Sousa. Geddes likes the book for its holistic approach to looking at IT architecture; the authors examine legacy systems in context with the internet and focus on the benefits of systems integration.

With 15 years' experience in management consulting, David Sutton has read his share of books on IT value. Currently vice president of the strategic services group at Inforte in Atlanta, Sutton has a handful of books that stand out as particularly useful and informative. Top on his list is EVA: The Real Key to Creating Wealth (John Wiley & Sons, 1998), by Al Ehrbar. This book describes in detail the economic value-added method of gauging corporate performance as developed by Stern Stewart & Co., the New York City-based consulting company.

Sutton sees an interesting trend emerging in the area of IT's contribution to the business. "Companies are valued based on their IT investments," he says.

"For example, when eBay crashed, its stock was crushed. A lot of analysts then looked at Amazon.com's infrastructure and gave that company high values based on it." To get up to speed with this new perspective, Sutton recommends E-Business: Roadmap for Success (Addison-Wesley, 1999), by Ravi Kalakota and Marcia Robinson. This book defines e-business as a comprehensive process and explores how managers can work out an overarching strategy.

Another selection that covers the brave new world of business is The Innovator's Dilemma (Harvard Business School Press, 1997), by Clayton M.

Christensen. "The message of the book," says Sutton, "is eat or be eaten." So all those companies holding back on e-business because they don't want to cannibalize their existing revenue streams are doing themselves more harm in the long term.

The books recommended in this list have an appeal that goes beyond the IT department. If you're a CIO who just can't make time for reading, pick up a copy of any of these books for your CEO.

Have you read any good business books lately? Let Senior Editor Megan Santosus know at santosus@cio.com.

HEAVY READING As IT pervades the corporation, valuation methodologies and perspectives have shifted accordingly to incorporate more mainstream business measures. Yet Michael C. Mah, managing partner with QSM Associates, a software development consulting company in Pittsfield, Mass., and editor of Cutter Information's IT Metrics Strategies newsletter, believes CIOs still need to be well versed in traditional IT value metrics that focus on software and project management. Mah's suggested reading list--along with his comments--follow.

Practical Software Metrics for Project Management and Process Improvement By Robert B. Grady (Prentice Hall, 1992) "Excellent guidance from a practitioner on obtaining performance measures for an organization."

Software Engineering: A Practitioner's Approach By Roger S. Pressman (Fourth Edition, McGraw-Hill, 1996) "More like [Grady's book] with good advice on several management dimensions."

Measures for Excellence: Reliable Software on Time, Within Budget By Lawrence H. Putnam and Ware Myers (Prentice Hall/Yourdon Press, 1992) "One of the original works on industry benchmarks and reference trends for IT benchmarking."

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