Three ROI "bullet points" slapped on a PowerPoint slide won't work to justify even the smallest IT investment. Top managers working with slashed budgets and smaller staffs want detailed cost-benefit analyses before they invest in new IT projects. Yet most IT professionals have never been formally trained on how to calculate return on investment or perform detailed cost studies.
That's beginning to change. Many businesses are kicking up their investments in project management and financial analysis training as a way to teach IT workers how to evaluate investments for ROI.
"CEOs and boards of directors are requiring specific information about financial costs and benefits before they will give the green light for new IT investments," says Lou Marcoccio, president of Marcoccio Associates, a Westboro, Mass.-based consulting firm specializing in cost/benefit analysis.
Project management training enables IT professionals to adopt a methodology that puts rigor behind business planning processes. "Many organizations have identified [project management] training as one of the best investments a company can make to bring the ROI they want," says John Bonnano, chief operating officer at TrainingTrack, a division of Boston University's Corporate Education Center.
UnumProvident Corp. is among them. "We realize training in project management and financial analysis is no longer merely a 'soft' item," says Rick O'Coin, the insurance company's director of IT education. "We can't ask IT departments to measure, evaluate and forecast ROI with no training or experience."
O'Coin says UnumProvident identified a gap in its IT training more than a year ago. "We weren't running projects well and weren't performing ROI or cost-benefit analyses as we should," he says.
Last spring, 30 of the firm's top IT project managers completed training from Boston University, which provided on-site sessions three days a week for nine months at the company's twin headquarters in Portland, Maine, and Chattanooga, Tenn. O'Coin says he's seeing an attitude shift toward ROI evaluation and project management training.
"When dollars were tight, we'd send IT professionals only for technical training, but not for other soft [skills]," he says. "Now we're sending those technology executives for project management training, and [we're] even evaluating what they've learned."
A year ago, says Marcoccio, only seven schools in the U.S. offered ROI-related training as part of their computer science programs. Now more than 1,500 courses are offered in colleges and universities and online. "This is a major money-making opportunity for many schools, as CIOs and IT organizations must learn to provide detailed cost analysis," he says.
Due Diligence, Please
Largely because of Enron Corp.'s financial woes, top managers are aware that they may be held liable if they don't exercise due diligence for potential investments. As a result, companies are performing quarterly financial breakdowns of costs, plus the direct and indirect benefits of any IT investment over a system's life.
Increasingly, executives want to know "what any new system will cost to maintain, what it will cost to train users, what it will cost to upgrade and what it will cost at the end of its useful life cycle to replace the technology," says Marcoccio.
At the same time, the payback period is shrinking. The typical time frame of 12 to 24 months for large IT projects has been pared down to eight months. The upshot is that CIOs must painstakingly analyze all costs to justify IT investments. It has also become nearly impossible to defend larger investments that can't guarantee returns within a year.
Ultimately, most businesses and industry analysts view the trend toward training IT personnel to evaluate and forecast ROI as a big plus in the long run. Some say the faster an organization can clearly visualize the business impact of an IT investment, the sooner it will implement new IT projects.
Reimers is a writer and editor in Germantown, Md. She can be reached at BDepompa@comcast.net.