What value means

In companies, value is explicit and monetary.
It is shareholder value, expressed through share price.

That number is precise, but what it represents is not certainty. Share price aggregates thousands of individual decisions made by investors. Each investor interprets information, forms a belief about the future, and expresses that belief through action: buy, hold, or sell. The market compresses those actions into a single number.

Shareholder value, as expressed by share price, is therefore not a description of the present. It is a collective judgement about the future.

IT does not have its own independent notion of value. It contributes to value by shaping the future the organisation believes in. When that belief strengthens, capital flows toward technology. When it weakens, capital flows elsewhere. IT value is revealed not by efficiency alone, but by how investment decisions change over time.

To reason clearly about IT value, it helps to make explicit three layers that already exist in how organisations operate.

The three layers of value

Value is formed through three distinct layers.
They differ by time horizon, by relationship to uncertainty, and by type of authority.

These layers are not theoretical. They are visible in how decisions are made.

Layer one: precision and the snapshot

The first layer produces a precise snapshot of reality at a given point in time.

This layer is governed by rules: accounting standards, legislation, tax codes, internal controls, and audit requirements. It produces numbers that must be correct, reconcilable, and defensible. Ambiguity is not tolerated.

Even when it describes “now”, this layer remains past-oriented. It records what has already happened or what exists at a specific moment. Its role is not to interpret or predict, but to establish facts that can be trusted.

In organisations, this layer sits with accounting, finance operations, and operational reporting. In IT, it covers costs, assets, usage, contracts, and inventories.

Layer one answers a narrow but essential question: what is true, in monetary terms, at this point in time?

It creates trust. Without it, nothing above can function.

Layer two: interpretation and capital allocation logic

The second layer is where facts are turned into judgement.

It takes the snapshots produced by layer one and combines them with additional signals: internal performance, customer behaviour, partner dependencies, competitive dynamics, economic conditions, financial constraints, and technological possibility. None of these arrive in a codified or stable form.

This is the layer where decision-making happens.

Executives, boards, senior leaders, and budget holders operate here. They build models, debate narratives, weigh trade-offs, and justify priorities. The artefacts may be spreadsheets or slides, but the work itself is interpretive.

This layer is messy by design. It cannot be made precise without destroying what it does. It exists to absorb ambiguity and still produce a coherent view.

Crucially, it is not limited to the C-suite. Every budget holder is an investor. The only difference is the size of their investment bag and the altitude at which they operate. At each level, people interpret information and decide where capital should move next.

Layer two answers a single question: given everything we see, where should capital flow?

It is the transition layer. It turns snapshots into a portfolio view.

Layer three: commitment expressed through action

The third layer is where interpretation becomes action.

This layer expresses a stance toward the future. Optimistic, neutral, or pessimistic. In market terms: buy, hold, or sell.

In public markets, this stance is expressed by shareholders. Inside organisations, it is expressed through budget decisions. Invest, maintain, or divest. Increase funding, keep it stable, or reduce exposure.

This layer is thin but decisive. It does not explain itself. It commits.

Every allocation decision is a value statement. Capital does not move accidentally.

Layer three answers one question only: what future are we committing to?

The internal capital market

Together, these layers form an internal capital market.

Capital is finite. Functions, products, capabilities, and initiatives compete for it. Allocation decisions express relative belief in future potential, exactly as markets do.

Value inside organisations is therefore relative, not absolute.

If total spend increases but one area captures most of the increase, that area is being bought relative to others. If an area grows in absolute terms but loses share of the total pool, it is being sold in relative terms.

Value is revealed through changes in capital allocation, not through static numbers.

Value as relative position

Direction alone is insufficient.
Up, down, or flat describes movement, not position.

What matters, in markets and inside organisations, is position relative to a pool and a baseline. This is why ratios matter.

To make this concrete, it helps to separate two ideas.

• Capital position: where a domain sits today
• Internal share price: how that position evolves over time

Capital position

For a given period \(t\):

• \( B_t \)​ is the budget allocated to a domain
• \( P_t \) is the size of the chosen pool

The capital position is:

\( C_t = \frac{B_t}{P_t} \)

It answers a simple question:
what fraction of the available capital does this domain control right now?

Internal share price

Pick a baseline period \(t_0\) and normalise it to 100.

The internal share price at time ttt is:

\( S_t = 100 \times \frac{C_t}{C_{t_0}} \)

This is not valuation.
It is a normalised position index.

Worked examples

Example 1: CTO view — IT relative to the company

As CTO, I want to understand how the organisation values IT over time.
At this altitude, the pool is the total company budget.

Baseline \(t_0\)​

• \( B_{t_0} = £100m \) — the IT budget
• \( P_{t_0} = £1{,}000m \) — the company budget
• \( C_{t_0} = \frac{100}{1{,}000} = 10\% \) — IT controls 10 per cent of company capital
• \( S_{t_0} = 100 \) — baseline internal share price

Next period t1t_1t1​

• \( B_{t_1} = £115m \) — IT budget increased
• \( P_{t_1} = £1{,}300m \) — the organisation is investing more overall
• \( C_{t_1} = \frac{115}{1{,}300} \approx 8.85\% \) — IT’s share of capital fell
• \( S_{t_1} = 100 \times \frac{8.85}{10} \approx 88.5 \)

Interpretation

IT grew in absolute terms but lost relative position.
From the company’s perspective, IT was sold relative to other priorities.

Example 2: Inside IT — cloud and AI

Now we zoom in.
The pool is the total IT budget.

Baseline \(t_0\)

• IT pool: £100m
• Cloud: £40m (40 per cent of IT)
• AI (inside cloud): £8m (8 per cent of IT)

Both are normalised to 100.

Next period \(t_1\)​

• IT pool: £115m
• Cloud: £55m (47.8 per cent of IT)
• AI: £18m (15.7 per cent of IT)

Internal share prices

• \( S_{\text{cloud}} = 100 \times \frac{47.8}{40} \approx 120 \)
• \( S_{\text{AI}} = 100 \times \frac{15.7}{8} \approx 196 \)

Interpretation

IT may be flat or down relative to the company.
Cloud is being increasing in value inside IT.
AI is a big priority in IT, with an almost double value.

Multiple buy, hold, and sell signals coexist at different altitudes, at the same time.

IT value over time

From this perspective, IT value is not a number to be calculated once. It is a trajectory.

If belief in technology as a driver of future outcomes strengthens, IT captures a growing share of capital. If belief weakens, that share declines. This does not fluctuate minute by minute like markets, but it does change as interpretation evolves and commitments are revised.

The role of IT is not to manufacture value directly. It is to influence interpretation, to shape the evidence and credibility that cause capital to move.

IT value is revealed when the organisation chooses to invest again.

Why this matters

This is a way to interpret signals that are otherwise easy to misread.

Budget increases, flat funding, or internal reallocations are often discussed in isolation. This lens makes those movements legible from the organisation’s point of view. It helps answer a simple but usually confusing question: what does this change actually say about the value the organisation is assigning to this domain?

It is not about optimisation.
It is about interpretation.

It exists to make visible how belief shifts inside an organisation, and how those shifts affect you, your department, or IT as a whole.

This three-layer view of value is the lens I will use going forward to reason about IT, cloud, and FinOps, and to make sense of decisions that otherwise feel inconsistent, political, or opaque.