Business Value in IT: Definition, Components and Strategies
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A company's business value is important in its success as both a business and a member of a specific industry. In most businesses, separate departments work together to maximize value and ensure the success of the company. Information Technology departments and organizations can contribute to a company's value by analyzing components of the department to streamline business operations as a whole. In this article, we discuss what business value in IT is, its importance to companies' goals, components and tips for increasing IT business value.
Related: 10 Tips To Create Value in Business
What is business value in IT?
Business value is the estimated health and well-being of a business by measuring concrete and abstract elements such as monetary assets and utility and employee, customer, supplier and societal value. These measurements vary between organizations and departments, but they can provide a better idea of a company's worth. In Information Technology, business value can be measured in elements such as usability, performance and security.
Why is business value important?
Determining business value is important because it can help companies determine opportunities and opportunity costs when planning for future growth and help them meet industry standards. Business value also helps companies analyze their strengths and weaknesses to set and achieve goals and improve the overall function, product delivery process and customer satisfaction rate. Questions about business value in IT often come from stakeholders and executives outside the department, so IT leaders need to understand this concept to help the company as a whole achieve its goals.
What are the key components of business value?
In any business, the key components of business value include increasing revenue, profitability, consumer satisfaction, determining market share and standing out from the competition. Revenue and profitability refer to the earnings received from a company's services and the analysis of profit to measure a company's financial success. Consumer satisfaction is a client's happiness with a company's products or services and their willingness to return as a customer. Market share determines a company's revenue compared to the entire industry's revenue, which means gaining market share is an indicator a company is outperforming competitors.
While these factors are important for determining business value in any company, there are additional specific factors used to measure value in IT. A few examples of these include:
Usability: Usability measures the efficiency of websites, networks, software and devices and the overall quality of a consumer's experience when interacting with these products.
Functionality: This refers to the ability of a product to perform the work it's intended to do.
Reliability: A reliable product is one that routinely performs its specified duties without interruption or errors that affect a user's experience or ability to correctly use the product.
Performance: Performance in IT applies to the effective work done by a specific system, program or application usually measured by accuracy, speed and performance.
Security: IT security refers to the protection of company and user resources like data, computers, networks and other sensitive information from unauthorized access, attacks and damage.
Agility: Agility is measured by an IT company or department's ability to respond to outside incentives such as pressure to change or adapt and the ability to create and respond to new opportunities.
Strategies for maximizing business value in IT
There are multiple paths a business can take to maximize its business value, but everyone can follow the same basic plan. Here are a few strategies to help maximize IT business value:
An IT organization can increase revenue by creating or taking advantage of new opportunities and improving the function of already-existing services. Improving efficiency, ease of use and other key factors can attract more customers and keep existing customers coming back. Another way to increase revenue is to meet market demands and create or increase consumer value by understanding customers' needs and tailoring your services to meet those needs. Reducing operational costs such as reexamining suppliers, limiting waste and using new business applications to improve processes can also help increase revenue.
Related: 20 Strategies To Increase Revenue
Create company goals
Company goals can make sure all employees have common ambitions and provide another way to measure success by creating a timeline to complete a specific purpose or objective. These short-term or long-term goals should be clear and most importantly attainable and employee-focused. Some examples of company goals include increasing cross-selling, building customer service, increasing market share and maintaining or increasing profits. Individual employee goals linked to a company's objective can also serve as a motivation tool because they can influence a sense of ownership when employees see how their work impacts the whole company.
Have a clear vision
A company's vision is an identifiable image of what the company as a whole hopes to achieve. Vision statements act as a guiding theme and often include clear values or beliefs. Having a clear vision for the company's direction and values can make it easier to plan for the future and create business processes that directly influence and measure the progress of business goals. When creating a vision statement, leaders can use the following tips:
Keep it concise and understandable
Be specific and keep the statement relevant to your particular market
Avoid using exact metrics
Collaborate with multiple departments of the company
Increasing business value is a process that involves multiple departments to achieve company goals, not just the IT department. For example, meeting with upper-level management and financial advisors for occasions such as granting research and development teams extra funds to generate new products and ideas for a certain project can possibly increase business value. Open collaboration throughout the company can improve and streamline business operations and ensure that all departments are working towards a common goal and receiving adequate financing.
Prepare to adapt
Technology is a rapidly developing industry, so a company can maintain or increase its business value by quickly adapting to industry changes. Rapid adaptation can give companies an advantage over competitors and increase their market share. Change can also happen within a company, so it's also important to adapt internally to keep operations smoothly running. This can include changes in management, budget or even project goals or deadlines.
Value can include measurements of a project's success or completion, and these can change over time. For example, the measured value of a mobile app may change from original downloads to DAU (daily active users) as the app grows older.
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