"For our CFO, an important metric is EBITDA," says Kevin Broadway, CIO of MetroPCS, a wireless carrier acquired by T-Mobile in 2012 for $1.5 billion. (EBITDA, an acronym for earnings before interest, taxes, depreciation and amortization, is a metric commonly used by companies with large debt obligations or expensive assets that depreciate over time. It measures how profitable their operations are, irrespective of financing and tax issues.) "IT contributes to EBITDA one way or another," Broadway says. "As we invest over time and our expenditures change, we make it worse when we're spending money. So if we twist the metric to invest more in IT, in theory you should see a positive effect on EBITDA over time."
How does this differ from return on investment, or ROI, a much more commonly used measure in IT departments everywhere? It doesn't, or not very much. In both cases, the key challenge for IT and finance is to go back and measure the economic effects of a project after it's completed and has been in place for a while. Broadway adds one extra step by figuring out how those effects accrue to MetroPCS's general profitability. "The one-to-one relationship isn't necessarily there," he concedes. "But it's another way to look at IT's contribution at a macro level."
In fact, Chris Curran, principal and chief technologist at PwC, says that you should alert the CEO to IT's accomplishments only when there's a specific benefit the CEO would value. "It will seem interesting to the business only if you can, say, demonstrate that integration after a merger saved 20 percent of operating expenses," he says.
When bad things don't happen
Explaining business value to CFOs and CEOs gets more challenging when that value is the reduced or eliminated risk of a business-impacting technology failure. But it's important to make the effort. "The onus is on the CIO to translate those risks you've identified and make a compelling case as to what the risk is to the business," Dolisy says. "What is the impact to the rest of the organization if these things are not taken care of?"
Dolisy notes that as a CTO who also functions as CIO, he's in a good position to understand the direct financial impact on SolarWinds if an IT system fails. "I have a rough estimate of the costs in terms of downloads and conversions if some of those systems are down," he says. "That's the only successful strategy -- to really understand what the value of the technology working is to the business so you can translate those technical risks and express them in the business's language."
Whatever the benefit you're trying to convey, Vitale advises seeking professional help in getting your message across. "You can leverage your existing assets internally," he says. "The corporate communications group within an organization is very powerful, and I would encourage IT leaders to be very familiar with the people in it," he says. "They usually handle internal as well as external communications, and they're only a step away from the C-level executives."
To take full advantage of this communication channel, Vitale recommends submitting regular "pseudo news releases" to the corporate communications department telling them about IT's activities. "Any mature organization has a number of ways to distribute this information internally, including intranet sites and even email blasts," he says. "If your company uses social intranet software such as Jive, Salesforce Company Communities, Podio, etc., it's a no-brainer that you should stay active on these sites."
What if your company doesn't have an intranet or internal social network? "Sounds like a great project for IT," he says.