ROI Takes Center Stage

If your business is like many in the United States, chances are good your information technology (IT) budget is facing more scrutiny. Our economic downturn, which shows limited signs of leveling, has forced many companies to eliminate jobs, cut budgets, or delay project initiatives. It’s sobering.

The prevailing requirement for organizations navigating these turbulent waters is the ability to do more with less. After two years of unprecedented levels of corporate IT investment, savvy managers are learning how to leverage existing assets and focus on return on investment (ROI) processes and metrics.

What’s Your Scorecard?

Five years ago, the IT budget was predictable and could be completed in a couple of months. Now, especially in these times of uncertainty, IT managers must continually plan, justify, manage, measure, and adjust IT spending and organizational costs.

So how are decisions made? Well, if you ask IT managers from 10 companies, you will probably get 10 different answers. I think it boils down to the following criteria:

  1. Expected company performance

  2. Data intensity of your company’s industry
  3. Technology adoption rates of your company
  4. Alignment of IT with corporate strategy

Based upon these criteria, you can derive a high-level investment profile and IT action plan — find out where your company fits in.

Good Expectations, High Data Intensity, Fast Internal Adoption, and Good Alignment?

Action Plan: EXPAND

Innovative companies that have demonstrated quick adoption of new technology should rapidly expand their IT investments. In times of trouble, companies that fit this profile have the opportunity to establish competitive advantages within their industry. They will probably continue with their e-business programs, enterprise resource planning (ERP) implementations, customer relationship management (CRM) deployments, wireless integration, and sales-force engineering plans, regardless of economic climates.

Poor Expectations, High Data Intensity, Fast Internal Adoption, and Poor Alignment?

Action Plan: MAINTAIN

Most companies fall in this category. The economic downturn has forced many organizations to adjust earnings expectations and business-performance estimates. However, many companies still face increasing data-management demands and an accelerating adoption rate of new technologies across the enterprise. For companies in this category, the recommended action is to maintain current levels of IT investment.

Good Expectations, Low Data Intensity, Slow Internal Adoption, and Good Alignment?

Action Plan: DELAY

Uncertainty can be crippling to companies that have been traditionally slow to deploy new technology. For companies that are less data intensive, IT has often been viewed as a discretionary investment. Companies in this category are casually described as “old economy” organizations that do not view technology as a critical element of their business model. I recommend you delay IT investments if your company fits this profile.

Poor Expectations, Low Data Intensity, Slow Internal Adoption, and Poor Alignment?

Action Plan: RETRENCH

If your company faces a bleak outlook and is conservative in adopting technology, competes in a nondata-intensive industry, and is nonaligned, then IT retrenchment is the only alternative. These organizations are typically problematic and have resorted to indiscriminate cost cutting, budget capping, and head-count reductions as a means to clear an increasing hurdle rate. These actions are not planned and are often taken to compensate for poor enterprise performance.

So, what are your company’s plans? These are pretty tough times for those attempting to make IT investment decisions. I would be interested to hear about your approach to navigating your organization through these turbulent waters.

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