|
Are you wasting money on technology? Reporter Dennis Berman interviewed two of the nation's leading experts on how small
companies can get the most return on their investment
W. Christopher Jesse, author of A Journey through Oz: The Business Leaders' Road Map to Tracking Information Technology Assets
BW: What's the first step to performing a successful return-on-investment analysis?
Jesse: If you don't know where you're starting from, you'll never know where you're going. The most critical thing required of getting an
effective return on investment is something most companies don't have — an inventory of all their technology. Some big companies say they're
converting all their desktops to Pentium III computers and don't know their bond traders are using Unix. Marketing is using Mac. And the bank
tellers have DOS. When you're building a technology plan to optimize ROI, you have to understand why people have the technology they have.
BW: How do you design that inventory?
Jesse: You can set up an inventory that answers the questions of what you have, how it's being used, and what utility you get out of it. So on
a spreadsheet, I might break users into different classes, finance, accounting, manufacturing. Under each row, a column shows what technology they
currently have, including things like hardware, operating-system platform, and the user's job-critical software, such as an accounting program.
Once you have that inventory, you need another section on user satisfaction. In one column, you need to ask the employees and managers, as a
percentage, "What is your level of technology satisfaction?" In a second column, you need to ask, "What is the opportunity to improve?" Now you
have a baseline of how technology is being used and the opportunity for advancement. Thirty to 40 percent will say, "I'm happy with the stuff I
have, now leave me the hell alone."
BW: Once those numbers are in hand, what's the best way to start upgrading?
Jesse: The people that have the lowest numbers — who say they're least happy — these are the ones I'm going to start with. But I'm going to
make sure I do the upgrades by functioning business unit, say, finance at the same time. I don't want a group of workers out of sync.
BW: So, great, you've got the upgrade in place, but now you need to determine whether it has done you any good. What's the plan?
Jesse: Let's say I want to get a 25% return on investment for my technology. I look at the total amount of desktop costs and the maintenance
organization serving it. So, what is my opportunity cost for this asset? If the asset costs $1,000, supporting it and software another $1,000, the
asset cost is $2,000. If I want a 25% return on this over three years, I'm going to get $500 in benefit every year, which makes my lost-opportunity
costs $3,500. Next step: I go to one of my engineers and ask what is this going to do for him? Someone's got to say back to me, "it will save you
$3,500 or more." It usually comes down to compile times [computer processing speed]. If techology can cut the average processing time from 4.5
mintues to 3.5 or 2.5 minutes, I've [recovered my] opportunity costs.
Lenny Liebmann, Highlands (N.J.) technology author
BW: Why does it seem so difficult for companies to compute their ROI?
Liebmann: It's only hard to do because we haven't decided to do it. IT departments fundamentally and structurally have no way of measuring
their real costs. A reason IT departments haven't done this for themselves is that they don't want to be accountable. I talk to CIOs all the time
and ask them, "What were the labor costs to do this?" or "How much more did it cost you for network management?" It becomes silly because there
aren't tools that make this process as easy as doing T&E.
Be careful. If you're a small-business manager, IT's fundamental mindset is that what they do for you is so great that being accountable for it
is amusing. If you ask for it, they will resist you and you will be a bad guy.
BW: Still, let's say you've invested a lot of time and money trying to determine your company's ROI number. How can you get the most out of
the process?
Liebmann: One of the key problems for IT has been making the transition from investments that are basically necessary utility investments to
investments that truly buy business value. It's the difference between making investments that reduce costs, say, $500,000, and those that create
$4 million [in new value]. You have the chance, with the same money [you'd spend on] reducing costs, to hit a jackpot.
Many people will often find that the return on technology is higher than people thought. Six months after technology is installed, people come
up with all kinds of new things to do with it that were never imagined or discussed. With a very small incremental cost, the return on investment
all of a sudden goes up. I've seen it time and time again. Also, the notion that if it's not quantifiable it's not a return, is a myth. Customer
satisfaction — you can't translate it directly to new business.
|
