How Does IT Defend its Value?

By Bruce Meraviglia, Technology & Marketing Editor, Microfinance Focus

In the early 1990’s, Robert Kaplan, a PhD-level professor of accounting at Harvard University, wrote a series of papers on how business should (could) consider the value of IT.  His principal position was that traditional accounting standards had no valid methodology for quantifying the value of IT in terms of its benefits to the organization (beyond the level of saying that an administrative assistant could type more letters with a computer than a typewriter).

This limitation of not being able to quantify the value of IT, from a classical accounting perspective, coupled with the current diminished status of IT to the rank of “just another department” within the MFI, has the potential to short-change the MFI when  it is creating its annual operating budget.  IF you cannot determine the value of IT, how do you determine an appropriate level of funding for IT that will allow it to contribute to the operational capability of the MFI?  IF you cannot determine the value of its contributions, how do you determine the worth of its accomplishments?

Unless the IT function is buying a specific piece of software, either operational or financial, to satisfy the requirements of the local government the MFI operates under, or to satisfy the requirements of a donor organization, few MFI managers adequately determine the worth of an IT investment.  Since the average IT professional has not been trained in how to construct a financially-valid business case to support the implementation of new technology, or to provide a system of metrics that will allow others to determine the value of IT’s contributions to the organization, the average manager in an MFI will usually just try to make an informed guess as to the worth of the IT department’s annual budget request.

With the ever expanding role of IT in the MFI, and the creation of services that are not possible without the use of technology.

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