When you’re selling a software solution that most organizations haven’t ever heard of or seen before, you spend a lot of time evangelizing. You spend a lot of time asking a set of foundation questions. What is the software? Why would someone need it? What does it actually do? How is it different than project management? Why would I want to spend money on it?
It’s that last one that we spend a LOT of answering and LOT of time thinking about. One of the ways we answer it, obviously, is by asking our customers and observing the value THEY get from it. And we’re often surprised by the answers. We’ve heard all the normal replies from “making my job easier” to “speeding up our portfolio planning process” to “giving me a platform to manage all this portfolio data”. But we’ve also heard some of the not-so-normal replies, like “if I get called in front of Congress, I want to have my data in line” or “my boss can’t make all the decisions by yelling the loudest” or “it will raise the valuation of my company”. I’ll cover the Congress line in a future post, and we all how the loud yellers work, but today let’s discuss that valuation response.
Software raising your company valuation? Seems like quite a lofty benefit from enterprise software. But we’ve heard it a few times, and it’s really an amazing benefit of being smarter with funding, budget, and portfolio decisions. And it’s all about cutting out the “fat” in a large portfolio, especially in IT.
Here’s the background… One of the most common goals and benefits of organizations using Decision Lens for portfolio prioritization is rooting out and removing inefficiencies. We hear from CIOs all the time that there is always waste around the organization in the form of stalled projects, misaligned projects, inactive work, past-the-time-of-value projects, etc. And they are wasting resources every day on them. The percentages we’ve heard is that it may be as much as 10% or 15% of all project work that is unnecessary or wasted. (Read: FAT!) And with IT budgets as high as they are, that can be a massive amount of spend. These CIOs are using Decision Lens to identify these projects, stop them, and re-direct their resources, removing the “inefficiency” from their portfolio.
And that’s where valuation comes in. The fundamental equation in valuing an organization is “efficiency ratio”, that is, comparing the revenue that comes in to the resources going out. And on the IT side, it’s nearly all “resources going out”. If you can find and eliminate the 10% of resources that are being expended unnecessarily, that’s a MAJOR improvement on the bottom line. And a major improvement on valuation. To our customers in the financial services and products industries, valuations go a long way towards bonuses and compensation.
So find the fat. Find the inefficiency. And find the higher valuation.