Smart Business spoke with Ryan Stephens, president and CEO of Perpetual Technologies, about how businesses can ensure they are getting a return on their IT investment.
Why are companies struggling with IT?
It is easy to be lured by the hype of bleeding-edge technology while not fully understanding how it relates to a company’s needs. Certain risks are associated with new technology. New technologies often are not fully tested and can introduce unexpected problems. Expert assistance may not yet be available. Deployment costs such as training, testing, implementation and upgrades may be significantly higher.
IT initiatives are not properly aligned with business objectives. Information systems exist to support business internally and externally. Business units and executive management have to be involved in making IT decisions. Regular meetings must be conducted between IT staff and management to ensure that projects stay focused on satisfying actual business requirements.
Companies frequently have no mechanism to measure success. This implies there is no accountability, realistic benchmarks or expectations for future projects. Implementing a grading system will help ensure projects stay on track and within budget.
How do you know where to draw the line with spending?
Definition and control. IT options are endless, but budgets are limited. Companies must analyze their needs and establish goals based on those needs. Once goals are established, a risk assessment is done. Projects should be well defined and opportunity costs weighed.
Some expenditure cannot be avoided. Any significant expense should be clearly defined, analyzed by management and financially justified. By taking a proactive approach to spending, it will be easier to maintain control as your IT needs grow. It is important to note that the newest technology is not always the best. Technology investments that don’t contribute to business success should not be considered.
How do you compute ROI?
Returns are computed based on a comparison of benefits and results versus the total investment. Methods for computing these returns differ among companies. Benefits consist of customer and employee satisfaction, streamlined processes, and enterprise protection among others. Regardless of the method in use, hidden costs must be considered. Hidden costs may include operations, maintenance, training, licensing, hardware, upgrade requirements, data migration, risk of system unavailability and labor.
How can IT success be measured?
Informally, the best indicator that your investment is a success is customer satisfaction.
Formally, there are frameworks for measuring and even managing IT success. The basic return on investment approach, the Balanced Scorecard and Six Sigma are examples of these frameworks. There are numerous resources available that can help you tailor a framework or approach to your business needs.
RYAN STEPHENS is president and CEO of Perpetual Technologies. Reach him at mailto:email@example.com or (800) 538-0453.