The real value of key performance indicators is exposing key performance Levers
When you're developing a list of Key Performance Indicators (KPIs) for IT, two things can get in the way. First, identifying meaningful IT financial metrics (there are lots of good ones out there, including ours.) But secondly, how do you ensure you're hitting the right priorities? Before you can build a list, you may need to ask: key performance indicators for whom?
It’s an important question, and one that establishes a key Apptio principle: key performance indicators must identify levers that drive business performance.
A KPI for IT—whether related to IT operations, delivery or another category—isn’t of much value unless business units, organizations, and internal operations across the enterprise can use the indicator to lower costs and improve performance. Not IT’s performance. Their performance. That’s why understanding “for whom” is the critical issue. There are all kinds of Key Performance Indicators that might be relevant to IT but meaningless to the brand, business, or organization owner.
Let’s use a core KPI as an example: Utilization Rate. As a raw number—like 80% of available storage or 100% of allocated VM memory used in a month—the utilization rate helps IT determine how to consolidate or decentralize resources. But it doesn’t necessarily help the owner of a business operation—the person who runs online trading, manages nationwide logistics, or oversees the outbound marketing operation—understand how the storage was used and how that storage lever can be pulled to better achieve business objectives.
The Apptio principle applies to virtually every KPI for every organization. Average response time means one thing to IT, another to Finance, and a third to the online trading operation. Likewise, each of those organizations can and should take different types of actions to respond to and improve the KPI.
That’s where Apptio comes in. With our SaaS apps, you can use key IT performance indicators to help identify key business performance levers. By integrating financial data with operational data, you can produce KPIs that mean something to every business leader. KPIs that tell IT too much storage is being consumed are not helpful outside of IT. With Apptio, you can show the head of that outbound marketing organization how their storage consumption impacts technology costs and activate a conversation that results in better consumption behavior and improves business value.
Respecting the relationship of KPIs to the business role of IT is crucial. Employing the right metrics will help ensure better alignment with key performance levers for your business.
Read more about measuring the value of business by downloading our 6 Best Practices for Communicating the Business Value of IT executive brief.