Proving the value of IT investments
Infor’s Phil Lewis argues that the net value of IT is too under-valued in today’s business environment, and that CIOs need to quantify and demonstrate the value of projects at all stages of their lifecycle.
It’s no longer enough for technology to merely support business — it must propel it. Only when business and technology strategies are properly aligned will they be able to achieve the maximum possible value from their enterprise software investments. A business may face several top priority business and IT improvement projects, but find it increasingly hard to prioritise them.
Or IT leaders may feel very comfortable measuring financial performance and improvements, yet struggle knowing how to include non-financial metrics such as customer satisfaction, lead times, or utilisation rates in this vital analysis. How can assurances be made that expected improvement initiatives will actually be in line with the strategy, or what the next move should be to stay at least one step ahead of the competition?
Many companies admit that they make decisions based on ‘gut instinct’ or struggle with the ‘do nothing’ option when they are evaluating potential business initiatives and wish that there was a definitive way to model the benefits of go/no-go. This is not sustainable. It is vital to clarify the benefits of going ahead with a particular project, or help decide which of the systems being evaluated would deliver the fastest payback and the most return in order to make the selection process easier.
It’s also important to understand whether a particular IT project has met expectations in terms of payback, ROI and overall value. By clarifying the benefits and quantifying the value, a benchmark for success is automatically created, providing a mechanism for measuring success. Benefits and value identified before embarking on the implementation project can be measured throughout and after the project to ensure resources have been focussed in the right areas.
It is imperative to uncover where there are potential improvements in existing business processes, systems, initiatives and the organisation itself. Start by quantifying achievable value for each initiative, and model their best possible options and outcomes. Potential initiatives can then be prioritised based on a company’s unique strategic business goals — which may be moving into ABC new markets, reducing costs by X for Y product, reducing the amount of inventory etc, and from this, a value roadmap can be followed with confidence to achieve real results. This also provides a platform and methodology for use in the future from a continuous improvement and investment maximisation perspective.
The ultimate success of initiatives depends on effectively managing the risks of any transformation. Success requires top-down commitment, as well as ground-up support and project management to execute effectively. Without that, as with any project, there can be delays, budget overruns, loss of internal support, resistance to change, or failure to deliver the expected results.
Typical areas of added value a company must strive for include:
• Optimised business performance.
• Improved customer service levels. Reduced inventory levels.
• Faster time to market.
• Increased market share.
• Lower costs and reduced risk.
• Lasting competitive advantage.
How can it be achieved?
It is necessary to follow a proven methodology and tools to:
• Benchmark against industry standards and competition.
• Demonstrate the impact on company results - if a small percentage improvement in company performance versus peers could be achieved.
• Help align strategy and objectives to performance benchmarks.
• Create a comprehensive business analysis, including a solution roadmap and ROI based on benchmarks, executive and operational interviews.
• Develop a more granular transformation study, including a detailed implementation plan.
It’s then possible to follow the roadmap and detailed implementation plan and execute on the initiatives as they are laid out for optimal results.
Ultimately adopting such a strategic approach to an IT deployment helps identify critical areas where value can be added to a business. The process of clearly identifying the multiple stages of return on investment within the lifecycle of an IT project can then really help secure ‘buy in’ across an organisation for the greatest benefit to the organisation as a whole. Proving the worth of the investment will ensure all parties will be engaged with ensuring a succesful deployment.
When business and technology strategies can be properly aligned, then technology can be appropriately deployed in order to propel the business forward. Only then can companies achieve the maximum possible value from their critical enterprise software investments.