How to measure the financial performance of IT

Measuring the financial performance of your IT environment can be a very difficult yet important task in making sure you are operating as efficiently and cost-effectively as possible.

First of all, you should look at the operating expenses of IT as a percentage of overall revenue. That gives you a baseline, and then you can start planning and tracking from there. A similar exercise applies to marketing, property costs, financial operations, or other areas of operating expense.

If you consider reducing IT operating expenses for greater profit, the risk to watch for is that (like any operating expense) you could lose capabilities and resources, which can lower revenues in the long run, and you could set yourself up for even bigger costs if you’re unready for future events. If you consider raising IT operating expenses to expand your capabilities, resources, and readiness, the risk to watch for is that the added expense will eat up too much of your revenue. Either way, tracking operating expenses of IT as a percentage of revenue helps you monitor the situation.

It’s also important to make sure IT spending matches organizational priorities. Make sure you can tie every new IT effort or on-going IT expense to an organizational priority. Any expense that’s not supporting an organizational priority is a candidate for elimination.

IT changes cost money too, whether you’re adding, replacing, or removing IT resources.

Maybe the best way to get an overall idea of how your technology systems are performing is to have an IT audit done on your setup.

IT audits can be beneficial for larger companies and organizations, answering questions such as: – Am I using the most up to date technology?
– Am I running my systems in the most efficient way possible?
– Is there any way to cut costs within my IT environment?

IT audits can also be extremely helpful to smaller companies and startups answering questions such as:
– Do I need an IT team?
– What sort of technology/software can help me streamline efficiency?

One important question that an IT audit answers for all companies is: How am I running my IT systems in comparison to other businesses/organizations like mine?

Answering these questions can help put the financial performance of your IT environment in perspective.