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Investors, Look at IT, Not Just Balance Sheets

Posted by: Olga Kharif on July 19, 2005

Call it a new — albeit, unorthodox — way to measure a company’s revenue growth potential. All you might need to do, according to a new study commissioned by telecom gearmaker Juniper and released on July 19, is evaluate a company’s attitude toward information technology (IT). I got an exclusive sneak peak at the study.

The study, which involved interviews with 560 companies (most of them non-Juniper customers) with more than $100 million in annual revenues and based in 10 countries, indicated that companies with certain IT-related characteristics constitently showed 30% higher revenue growth.

What did they do differently? Interestingly, their IT budgets weren't necessarily higher, says Kim Perdikou, associate general manager of infrastructure business team at Juniper.

In certain things, however, the differences were pronounced. The fast-pacers typically supported mobile workers, the use of Web services and an Internet Protocal (IP) network. And these can really rev up a company's productivity and cut costs.

The fast growers also had 45% more IT projects (eight vs. five or six projects) going on at a given time than the slow-growers. Essentially, instead of implementing five very large IT projects, taking years and, thus, offering highly uncertain outcome and benefits, the go-getters broke down their projects into little bits. The results were achieved faster. The success or failure of an IT project became apparent sooner.

According to the study, the "dynamic leaders," or fast-pacers, include MGM Mirage hotel and casino and biotech company Serono.

What I am wondering about is, if IT is, indeed, closely tied to revenue growth, shouldn't investors be looking at IT data, in addition to the usual Income Statement and the Balance Sheet, to determine a company's growth potential?

Today, most companies' annual reports do detail major IT initiatives; but, I think, most investors tend to skip those as irrelevant data. Perhaps they shouldn't do so any more.

Then, the question is, how do you quantify and compare different companies' IT initiatives? This issue has gotten me stumped. Do you have any ideas?

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Reader Comments

Tim Matthews

July 21, 2005 05:00 PM

Is this the career-building opportunity CIOs have been waiting for? They could, gulp, participate in investor calls or present at investor conferences...

Regarding your question, we vendors are always trying the ROI sale, but this practice is all over the map. Maybe if the CIO's bonus were tied to ROI for his budget, we might have a more rational sales process for all. This might be a start to judging how well technology is used within a company.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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