No Magic Wand

There is no magic wand for determining a defensible ROI for an IT project – ROIs are very unique to each enterprise. This is due to the fact that companies see markets and opportunities differently -they tend to focus on different operating activities that develop a unique set of capabilities and competencies that lead to some sort of competitive advantage. With that, companies have different key performance indicators and success factors. Until you understand what is important to your enterprise, developing a compelling ROI for your next IT initiative will be challenging.

No magic ROI

Companies might agree that driving down operational expenses and reducing capital expenditures (or increasing strategic capex expenditures) are a necessary part of operating efficiently; but how each company accomplishes this goal is different. How they measure and quantify the impact of operational efficiencies is also unique. Some companies get out a stopwatch, monitor activities and develop ROIs based upon process efficiencies. Others focus on measuring the intangible benefit of people having seemless access to data and information. How do you quantify such a squishy metric? Google proved that when people have access to better, more accurate information quicker – people tend to solve problems more efficiently with better accuracy (just check their stock price and market valuation to quantify). People are not just more efficient, they are more informed – leading to better, more informed business decisions.

Strategic IT

IT is unique in that it can tip the scales in either direction – as a strategic asset or strategic liability. Strategic IT must focus on the key operating activities that map back to the strategic goals of the organization. This requires that IT focus from the “outside in” or from the business user/customer back to the data center. This is a paradigm shift from the traditional model of build, silo and secure. IT shifts into a position of enabling the business -empowering business users with platforms that promote self service leading to process efficiencies and better visibility across the digital assets of the organization.

Modernize

Companies must modernize their IT operations to compete in today’s global economy. Companies that make the correct IT investments (focusing and enhancing key operating activities) actually do more with more. On the other hand, companies that fail to modernize their IT/IS infrastructures fail to adequately compete. It has been shown that companies that develop a digitized platform (that centralizes, people, processes and information) are more profitable and better prepared to react to market changes.

Companies that successfully create and manage an EA that puts the information, resources and tools in the hands of the decision makers gain key insight into their products, services and operation.

Companies with an Enterprise Architecture (Interconnected, Planned and Flexible Architecture)

• Drive down operational costs through automation - leveraging free cycles to focus on innovative and higher value activities
• Better position companies to integrate 
• Promote agility and forward thinking activities
  
• Provide process visibility across the enterprise
  
• Promote efficiencies

Typical Company Review

Legacy Information Systems infrastructure built upon applications that are either out dated, unsupported or homegrown and internally supported.

Common Threads

• The environment is costly to support and outmoded
• Information is siloed across many disparate systems
• Many manual or duplicate processes (double, triple entry)
  
• Little or no realtime information
  
• Stakeholders are dependent upon the availability of information as supplied  by the legacy environment limiting their ability to:
  • Find, locate and see across data sets
  • Efficiently collaborate with colleagues and to inter-operate with modern, standards based systems

Support staff is:

Dedicated to supporting a legacy environment; spending the majority of their time keeping systems running and operating instead of creating forward thinking platforms designed to empower internal and external customers. This is primarily due to out of date legacy back-end systems that are costly to support – driving up operational expenses while at the same time decreasing the overall productivity of the enterprise. Many companies in this stage spend the majority of their IT budget on maintaining and operating current systems as opposed to developing and enhancing key business activities.

 

Similar companies focus high percentage of the IT budget on operating and maintaining existing systems – leaving only a fraction of their resources available to focus on new and emerging opportunities

Proposed Future State

Create an environment where IT/IS acts as an enabler, driving down operational expenses (workforce reduction and/or retooling)  while enabling the enterprise to better collaborate and communicate in ways that move the organization into a more proactive, agile and forward thinking enterprise. You may be close than you think...

Step 1 - Get your house in order - become a strategic asset.

If you have users that suffer from frequent computer problems, performance issues, remote access issues, slow applications and untold other problems; fix these first – you are a strategic liability. Once you get your house in order, you will have a firm foundation with which to build IT into a strategic asset.

Step 2 - Act Now

Migrate to a supported “platform of execution” or what Weill and Ross refer to as a “digitized platform” that centralizes data and information – empowering business users to better reuse, locate and collaborate on business critical information across the organization; from lead to cash.

Typical Goals

• To standardize on an integrtated platform that drives down the operational costs of IT --while empowering business users to do more on their own, such as:
  
  • Enhancing key operating activities to fit the changing business environment and requirements
  • Product development
  • Listening to customers and customer service related activities
    
  • Improving the lead to sale -> sale to service -> service to cash life cycle
    

 Step 3 - Define your goals and success factors

What is the goal of  IT for your organization? Keep the computers on? Or to improve and enhance business processes? Always know your success factors and who will determine whether the initiative was a success or failure. For many IT departments, the internal customers (employees) determine the success or failure of an IT project. In other organizations, it might be a couple of key stakeholders, CEO or GM.

Step 4 - Create an ROI

It is actually very easy but you have to be creative --keep it simple. Hubbard (2007) promotes the idea that anything can be measured, especially IT projects – you just need to find a metric that is use-full to your enterprise, i.e: reducing AR, finding and locating information quicker, reducing execution time, decreasing manual input or double entry, more access, reporting and/or workforce reduction and retooling. Keep it simple and narrow – just ask the CEO, COO or CFO- what really matters – then develop with the end in mind.

Example: (I love this one – provided by Hubbard (2007)) – The Chicago Symphony was trying to determine the best way to measure their success. You can imagine the complexities that arose from this conversation – surveys, mailings, who knows – but you can imagine that they were pulling their hair out. Solution? Count and record the number of standing ovations over an extended period of time…beautiful.

Step 5 - Solve Real Problems

Are you solving real (and/or the right) problems, symptoms or problems that do not exist? Solve real problems that are communicated to and vetted by a centralized tech committy overseeing the global IT strategy (this can be informal and ad-hoc). Build in, not out. Start with the employees and key stakeholders and work back to the data center – this helps keep focus. Better yet, create an environment where business users can start locating, finding and reusing information and content on-demand.

Step 6 - Involve the whole company

Engage the whole company when redesigning or deploying a centralilzed and interconnected platform - you may be closer that you think. It might be time to simplify...

- Lewis Howell

References and Influential Works

Hubbard, D. W. (2007). How to measure anything: Finding the value of “Intangibles” in business. Hoboken: John Wiley & Sons.