February 17, 2003 (Computerworld) --
WALL STREET CARES
Executives of public corporations will begin disclosing large capital investments as part of their quarterly analyst calls by end of 2003. By the end of 2004, 30% of IT spending will have to pass a board of directors' capital-approval process.
• Craig LeGrande, co-founder and managing director, Mainstay Partners LLC, Redwood City, Calif.
VENDOR CALCULATORS
ROI is here to stay. Chief financial officers are pleased with the structure it brings to IT decision-making, and CIOs can finally sleep well at night knowing they can prove the value of their decisions. But during the next 12 months, we'll see the death of the automated ROI calculators from vendors. They're just sales tools that few people trust.
• Ian Campbell, chief research officer, Nucleus Research Inc., Wellesley, Mass.
COMPENSATION LINKED
CIOs and other IT executives will find their compensation directly linked to their ability to provide ROI to their companies, using a complex formula that monitors effectiveness and efficiency. The formula will take into account the complexity of a company's operations, how quickly the company and its market are changing, and how well the IT organization has been able to address the needs of the business.
• Bruce Barlag, president, The Hackett Group, Atlanta
ROI MYOPIA
Clients say they can't do any projects that don't provide a payback within one year. And look at their IT investment portfolios -- they have a lot of small projects that result in incremental improvements. The breakthrough stuff of real competitive advantage is gone. ROI is a great discipline for cutting costs, but we're in danger of developing ROI myopia and missing opportunities to grow revenue and market share.
• Eileen Birge, vice president, The Concours Group, Kingwood, Texas
FINANCIAL PENALTIES
CIOs and vendors will begin to truly collaborate on ROI analysis -- and tie compensation to achieving financial returns -- by hammering out ROI service-level agreements. If vendors fall short in meeting the SLAs, they'll be asked to make corrections or suffer financial penalties for continued failure. On the flip side, suppliers who substantially exceed the benchmark will be able to extract benefits like additional revenue, testimonials and other marketing support.
• Tom Pisello, president and CEO, Alinean LLC, Orlando
CRM TRENDS
Customer relationship management projects will experience the following trends in the next few years: They'll be smaller, more focused and self-funded from cost savings or new revenue. ROI metrics will be geared to specific vertical industries, such as the automotive, financial services and pharmaceutical industries, instead of being generic. And the goal of many CRM projects will be to identify the most profitable customers vs. the low-value customers.
• Adam Klaber, global leader for CRM, IBM Business Consulting Services, New York
LOW-TECH CIOs
It's ironic that finance departments routinely use sophisticated technological models to manage risk and value investment portfolios, but IT departments have not seriously applied financial modeling techniques to assess the true value of IT projects. That will change in a few years.
• Ray Trotta and Chris Gardner, co-founders, iValue LLC, New York
VIABILITY CHECK
Wall Street analysts, ratings agencies and banks will begin using an evaluation of IT ROI as they determine a company's viability, its future prospects, the credibility of its forecasts and its ability to deliver customer and shareholder value.
• David Axson, managing director, The Hackett Group
CULTURE COUNTS
By the year 2007, 90% of companies will budget for the cost of culture change and factor that into the ROI equation. Companies will no longer turn a blind eye to having billions of dollars' worth of technology sitting unused in closets due to "adoption resistance" by people in the company.
• Joe Santana, co-author of Manage I.T. (Lahaska Publishing, 2002)
VISUAL MODELING
Company executives must find a way to shorten the gap between an ROI prognostication and the actual outcome. In three to five years, visual modeling will gain momentum as a way to improve the accuracy of ROI forecasts. Information captured in the upfront design of an IT initiative will provide critical underlying data about tangibles and intangibles, which will make ROI calculations more in sync with what actually pans out.
• Faisal Hoque, president and CEO, Enamics Inc., Stamford, Conn.
PORTFOLIO TRACKING
Low returns on large capital investments will stimulate the use of portfolio-tracking software for IT investments. That will boost the market for project and portfolio management software by up to 15% in 2003.
• Sanjeev Agrawal, co-founder and managing director, Mainstay Partners
FINANCE 101
When it comes to calculating benefits, chief financial officers have been assessing tangible and intangible benefits for years, and it's made an issue only by IT folks and consultants who know little about finance. During the next two years, we'll see finance departments mandating a common structure and consistency when assessing benefits. If you're an IT person today, dig out your old finance textbook and start reading.
• Ian Campbell, chief research officer, Nucleus Research
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