Total Value of Opportunity
Total Value of Opportunity (TVO) is a metrics-based methodology for measuring business performance. This Gartner-developed model brings a number of factors together to derive the business value of IT investments, thereby providing a basis for IT decision-making.
TVO measures business performance based on three important factors: risk, time, and the effectiveness of converting projected value into actual business benefit. It is important to note that these metrics must be rooted in the business, not in IT. The business and finance stakeholders determine investment criteria for all types of investments and must bear much of the responsibility for exploiting the technology correctly to deliver the projected business benefit.
The key components of the TVO methodology are:
- Cost analysis: Cost must be examined on the basis of TCO principles to ensure that visible, hidden, one-time, and recurring costs are all included.
- Benefit analysis: Benefits must be modeled against a holistic framework of business metrics, which represent all of the controllable activities of an enterprise. A sample set of these activities is discussed and divided into nine categories: market responsiveness, sales effectiveness, product development effectiveness, customer responsiveness, supplier effectiveness, operational efficiency, HR responsiveness, IT responsiveness, and finance and regulatory responsiveness.
- Future uncertainty: Many IT-enabled business initiatives, particularly those with infrastructure components, are not expected to deliver all their value to a single source, or to meet a single need within a precise time frame. A complete value analysis must enable some quantification of the value that a successful initiative would deliver to the business at a future time.
- Enterprise needs: IT initiatives need to be measured against enterprise needs in five areas: strategic alignment, risk, direct payback, architecture, and business process impact. The more closely a project meets the needs of the areas deemed important by the enterprise, the more likely it is to be an appropriate investment for that organization.
Each of these components is assigned a weighting relevant to the enterprise. The resulting product determines each project's value and therefore its priority in the portfolio of changes being contemplated.