Causality analysis of IT capabilities to achieve maximum business outcomes

Abstract

Outcome-based business (OBB) is a business model that directly links a service provider's revenue or fee to the business value delivered by enabled services to the client. Its financial construct allows for a shared risk and reward model. Using OBB model, the service provider earns its revenue upon meeting mutually agreed benchmarks that affect these key client business outcomes. An OBB engagement typically requires establishing a long-term relationship with the client and reduces the risk for the client during the business transformation. A key component of an OBB business model is its ability to determine the impact of a particular IT solution on the performance of client financial and operational metrics. We outline a systematic method to enable us to do so. We begin with a process to identify gaps in the client's financial or operational performance. Then, we identify the business drivers that can improve those gaps. Next, we map the prioritized business drivers to the underlying IT capabilities that impact these drivers, creating a causal relationship chart called a service value map. Based on the causal relationship between the IT capabilities and the prioritized business drivers, we identify the priorities of the IT capabilities for gap improvement. In the second part of the analysis, we assume that each high level business driver can be measured by a metric (key performance indicator). With the help of a heuristic approach, we estimate the change of the metric over time using the service value map. This is accomplished by: 1) creating two baselines that define the bounds of the metric, and 2) using a maturity analysis to quantify the impact of the IT capabilities over time.