October 4, 2011
By, Sunny Gupta
Despite having one of the lowest payrolls in Major League Baseball, Oakland A’s General Manager Billy Beane built a winning team employing something called “sabermetrics” (Society for American Baseball Research + Metrics). In his bestseller Moneyball, author Michael Lewis chronicles how Beane was able to field a consistently winning team using advanced analytics to gain insights into players that other richer teams had overlooked.
So what could Moneyball and CIOs possibly have in common? Quite a bit, actually. Sabermetrics is the “the application of statistical analysis to baseball records, especially in order to evaluate and compare the performance of individual players.” While baseball decision makers have long applied statistical analysis to measure and manage their teams, the arrival of sabermetrics has fundamentally changed the way baseball executives make decisions. For budget-strapped CIOs looking to change the rules of their own game, there are several parallels to be drawn.
As any baseball fan will tell you, statistics are a currency of sorts for baseball decision makers. But the most popular statistics can often be misleading. For more than a century, baseball general managers relied on many of the same statistics to objectively evaluate talent. In short, baseball had long valued one set of metrics (such as Runs Batted In) over other more mundane, yet equally, revealing statistics (i.e., walks).
Like Billy Beane, today’s CIO needs to think differently about their own IT metrics. As budgets remain flat and CIOs are asked to do more with less, it’s become essential that they can articulate the tradeoffs between cost, quality, and valueof the products and services they offer the business – and do so in a language the business understands. As with baseball, cost is foundational in understanding the dynamic between quality and value. Yet only a small minority of CIOs can answer with a high-degree of confidence the cost/value trade-offs of offering five 9’s of availability versus three 9’s. Without the ability to break costs out in a granular fashion – and allocate them fairly across the business – the CIO is unable to make defensible choices about their IT investment and consequently, will lose credibility with the business.