David Rae

Next time you’re chatting with a stakeholder in your business about a potential IT outlay, use the phrase ‘technology-related business growth’ to shoot down in flames any suggestions that an IT project should be looked upon as a cost rather than an investment.

While blatantly a phrase invented on the hoof by yours truly, something needs to be done about how we can successfully measure the true value of technology to the success or otherwise of the business.

Traditionally, measurement devices such as return on investment and total cost of ownership studies have been viewed as important to assess the viability of a capital expenditure – particularly an information technology one.

But, as a survey in this month’s issue, carried out among readers and in association with Computer Sciences Corporation, shows, these traditional measures have become almost obsolete.

The research shows that although finance directors now realise that IT should be intrinsically tied in with company strategy, many are still not clear on how to measure its true value to the organisation. And this is where technology related business growth (or TRBG for short) can help.

When asked why their company does not actively try to measure the potential return on investment of a technology outlay, one finance director had this to say: “It doesn’t measure anything but money. A project that returns nonfinancial benefits as well as monetary benefits can be more valuable.” Another said: “The project may turn out to deliver greater return not only for the organisation and its clients but there could be external factors, which benefit the wider community. These environmental benefits could be lost with a restriction to return on investment.”

There are two conclusions that can be drawn from these comments – and the many more from the survey like them. First, it seems as though business and technology is finally beginning to see eye-to-eye; and second, how, exactly, can technology expenditure be justified?

Consider a substantial investment in a new converged network, which will allow your company to send phone calls, video and data over the same network to every desktop in the business. (If you haven’t already been told that such a system is key to your company’s future survival by your IT director, there is no doubt that you soon will be, by the way.)

There are some very obvious economic and business reasons for signing off such an investment. The money saved by routing phone calls over your corporate network can be huge; and converging data and communications on the same network can allow you to present your sales force with immediate access to a customer’s records, while fielding a sales call, are just two.

Mobile technology, which would allow your staff to occasionally work from home, or your sales force to work on the hoof, could also benefit your company in more than one way. True, they could become more productive, leading to greater revenues, but the increased flexibility could also improve the goodwill of staff to such an extent that they put in an extra 10% of phone calls; they could recommend the company to friends; stay with the company longer, or react in any one of an endless list of immeasurable ways. (No one said this was going to be easy.)

It is the intangible benefits of such outlays that are often far more valuable to the business than the actual cost savings. The goodwill generated by a more personal sales call made possible by the investment in a converged network is almost impossible to measure. But if there is evidence of customer gains achieved due to word-of-mouth recommendations, then this is likely to be linked to the initial technology outlay.

A proportion of the investment for both the converged network and the mobile technology should be given a TRBG score, however far away from the intended benefit of the initial technology the actual benefits might be.

It is a fact illustrated well by another finance director who kindly responded to our survey: “There has been a shift [away from return on investment as a measure of IT project success] because the overall business may transcend pure financial reviews. While it is important to have a measure to evaluate projects this is not the only element to be included in project evaluation. It is equally important to evaluate the effect on personnel and, probably more importantly, customers. Any project which does not consider the impact on customer satisfaction will not succeed and it is very difficult to quantify the results of this.”

However unrealistic it may be to try and introduce a new technology accounting standard into the business world through the pages of a magazine, it is well worth revisiting some past IT investments to try and re-evaluate some of their benefits. It could provide an illuminating experience and might convince you, or the chief executive, that technology permeates every aspect of the business.

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