Doing The ROIght Stuff

Are you wondering how your company can get a greater return on its IT investment? Believe it or not, it should be a piece of cake. Here's how I came to that conclusion:

First, take a look at the baseline facts--how companies manage their IT investment "yield/ROI" today.

Realizing a greater ROI should be a piece of cake because the base for getting greater return is almost zero, zip, nada documented return. Almost anything would be an improvement, for close to eight out of 10 companies

So what are the steps to getting this piece of cake? The key is to treat IT as an investment portfolio from which you plan to get a return. (What an idea!) The basics include rethinking all things IT as an investment portfolio.

First, split the portfolio into two main parts: the "Run the Business" (RTB) investments and on-going costs to keep the lights on, and the "Grow the Business/Invest in the Business" (GTB/ITB) portfolio of projects and initiatives that move the business forward strategically and operationally.

Next, stratify all work in the portfolio areas by where the value/return shows up (e.g. grow revenue, reduce cost, avoid cost, customer satisfaction, process simplification). Then, add on the dimensions of quantification, timing of benefits, and risk. That gives you a portfolio profile.

Now, use this profile activity by tracking everything (your operating environments, core systems, customer-relationship management, and E-business), based on fulfilling each inherent promise of value and of generating ROI. Keep projects on the radar--not just until they're delivered, but also until their benefits have been reached. Then, continue to track them, based on their engineering performance targets.

Think You're Doing This Already?
If you say you're really doing all of this already and nothing is new here, take this acid test. The few companies that we've seen applying these principles have:

Can you match these results?

META Group research shows that by the standards presented herein, trillions of dollars of IT corporate assets worldwide are essentially unmanaged and untapped to create shareholder value. Our estimate is that, since 1980, corporations worldwide have invested $6 trillion to $8 trillion or more on building their IT asset base ($8 trillion is roughly the U.S. GDP. According to survey data, 50% or more of this "IT fund" is unmanaged--that's $4 trillion!

On the flip side, companies that manage their IT assets as an active investment portfolio aligned with their investor needs (the business, its customers, and shareholders) have extreme competitive advantage. An analysis of business performance and technology investment management from the Technology Leaders Index on our research site www.metricnet.com indicates that companies following these principles generate superior shareholder value (in terms of market valuation tracked over the past 18 months) and are less susceptible to market fluctuations (in terms of volatility tracked over the past 18 months).

So the answer to the question posed to me--how should a company realize a greater return on its IT investment--is pretty simple. Treat technology as an investment portfolio; apply portfolio management principles; categorize all investments by value, risk, and timing; and manage and monitor by value. In short, just do the ROIght stuff.

Dr. Howard Rubin is executive vice president and research fellow at the META Group in Stamford, Conn., and professor emeritus at Hunter College of the City University of New York. He can be contacted at [email protected].