Keeping IT projects on track

As publicly held companies struggle to meet quarterly earnings targets, IT executives are under increased pressure to ensure that business-enhancing projects aren't curtailed.

There's a relentless in-your-face reality that IT managers have to address, especially at publicly traded companies. When the quarterly financial report is due, the pressure from top brass to hit earnings-per-share targets becomes paramount.

This can force IT shops, which are still considered cost centers at some businesses, to defer a big purchase that's part of a strategic business initiative, such as installing x number of modules for an enterprise resource planning (ERP) effort that's already under way. Or to push back the hiring of project managers and developers for a big customer relationship management (CRM) project to the next quarter.

Since publicly held companies are constantly having to do the numbers dance with Wall Street investors and shareholders, here are some tips to help IT managers keep long-term projects on track.

The key to overcoming the quarterly earnings predicament, say IT and business managers, is to develop measurable goals for IT projects that are tied to solid business-side returns. Enterprises need to make a commitment to finding a return on investment with an agreed-upon methodology that includes regular updates or face-to-face meetings among senior-level team members.

Also, IT managers must work more closely with business managers and learn how to communicate about project goals and milestones in nontechnical terms.

"CIOs always need the awareness of the total performance of the corporation in everything they do," says Ron Ponder, former CIO at Sprint Corp. and AT&T Corp.

Many of the experts' basic recommendations appear to be in place at Owens Corning in Toledo, Ohio, which announced a Chapter 11 reorganization plan in April.

"The biggest way we deal with quarterly pressures is to deliver on what we say we'll deliver on," says David Johns, Owens Corning's chief supply chain and IT officer. Supply chain and IT functions were combined during the firm's reorganization, which has "been a great combination" and has resulted in a $32 million productivity savings in the first year alone, representing about 5% of the firm's total costs, says Johns.

Among the other steps it took, Owens Corning conducted upfront benefits analysis for a multimillion-dollar advanced process control project implemented in early 2001 that is being expanded to more than 20 manufacturing plants globally. The project is monitored with quarterly meetings of the executive technology committee, a five-member group that reports to the CEO.

In one scenario, the advanced process control effort examines the optimal use of asphalt in the production of roofing shingles to ensure that asphalt isn't being wasted.

Quarterly meetings with business and IT "initially included a lot of pushing back and forth, but now they go well, and we make sure we are aligned with business partners inside Owens," Johns says.

By comparison, without the high-level business and IT sharing process, an ERP implementation started in 1995 at Owens Corning "didn't do as good a job at defining goals as we would today. What we have found is that the data and business justification has got to be there," says Johns.

The ERP project, which involved installing SAP software across different business units, encountered similar problems that corporations run into when they treat ERP as a tech project but don't look at the organization as a whole, says Johns. At Owens Corning, "we didn't approach training properly," he says, but by 2001, the company had learned its lessons and now has a good ERP implementation.

Bringing ROI to Light

Keeping IT projects alive is always tough due to earnings-per-share pressure, "but it's especially a problem when economic times are tough as we're now experiencing," says Mehrdad Laghaeian, CIO at Osram Sylvania Inc., a lighting products maker in Danvers, Mass.

After 20 years of working in IT at several companies, Laghaeian has learned that "if IT is not considered a strategic tool for the business then the [quarterly earnings] problem is much more pronounced." For instance, if an IT manager considers adopting the latest desktop operating system with hundreds of machines but can't tie the investment to anything that will improve the business, the request will - and should - die, he says.

When Osram Sylvania began a multimillion-dollar CRM project three years ago, the effort was planned by a team of 14 senior business and IT managers. The project went live in October 2000, after the business side adopted ROI factors, including reduced head counts in IT and savings on transaction costs, Laghaeian says.

He believes the CRM project might have flown in the current down economy because of the business-side involvement. By contrast, a storage-area network (SAN) project might seem purely an IT project today, without a clear business driver. Says Laghaeian, "I'd have to say, 'What is the justification for a multimillion [-dollar] SAN system?' "

At some companies, IT projects with long-term priorities typically receive strong business backing.

For example, at United Parcel Service Inc. in Atlanta, which spends about $1 billion per year on technology, each IT proposal must be judged by the business value it will net, says David Salzman, wireless project manager at UPS. Regardless of the economic downturn and its impact on corporate earnings, UPS continues to have "very strong development" of IT projects, which are approved by business unit managers who push decisions down.

IT projects at UPS have been aided by an awakening experienced by senior management several years ago: Rather than viewing itself simply as a package deliverer, UPS has expanded its purview into the logistics and information business, according to Salzman.

Consultant Tom Mangan at Andersen Business Consulting in Atlanta says it's key for CIOs to use "political skills" to get business managers to put the financial business benefits of an IT project within the business operations plan. This way, the IT project is credited with the return and not some other factor in the organization.

Mark Segher, director of e-commerce at American Medical Security Group Inc. in Green Bay, Wis., says the way to keep an IT project alive through quarterly pressures is to convince senior management that it has business value. That can include developing a payback model for several months instead of several years, or putting in place steppingstones with definable ROI targets each quarter for a long-term initiative, as Segher has tried to do with a business portal created last year that is used by 20,000 insurance agents.

Robert O. Graham, chief technology officer at Infocrossing Inc., an outsourcing and co-location provider in Leonia, N.J., says he recently built a Web portal with multiple functions for his firm. To meet quarterly requirements, he staged its growth. The project started several years ago with skeletal functions, with subsequent rollouts of other features.

Another tactic Graham used to achieve buy-in was to show business managers various phases of the portal in their working state just before they rolled out. To help balance costs when money gets tight, Graham has also resorted to disposing of consulting resources for a quarter or longer.

Still, he acknowledges that it's "not easy to quickly knock off a development effort."

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Copyright © 2002 IDG Communications, Inc.

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