TotalCIO

Jun 12 2009   2:38PM GMT

Champy: There’s no return on pure technology investments

Karen Guglielmo Karen Guglielmo Profile: Karen Guglielmo

It would be suicide for a CIO to go to the CFO or CEO and say there’s no real return on our technology investments. But according to one industry expert, it’s the truth.

 

“If you just make a technology investment and don’t change the way you’re doing work, there’s no return on it,” said James Champy, author and chairman of consulting for Perot Systems Corp. during a recent interview at the MIT Sloan CIO Symposium. “The ROI doesn’t come from the investment in pure technology, but from the change in the nature of the work.”

 

According to Champy, the only way to measure the success of a technology investment is not through ROI, but through the realized improvements in business performance. And in the end if you have a dramatic improvement in business performance, you usually have a significant ROI from your technology investments.

 

So what’s the best way for measuring business performance and communicating the role technology plays in its success?

 

Many companies use BI scorecards and dashboards as a formal means for measuring business performance in the enterprise.  These types of tools allow companies to use data in a more productive way and better align technology goals with the needs of the business.

 

As far as communication goes, you should “go to your company executives and tell them ‘here’s a way we’ve used IT to get a product to market, or respond to a customer call the day it comes in, or reduce the cost of a process by 50%,’” advised Champy. These types of “wins” are great examples to show the business executives how work has been significantly improved by technology investments.  

 

And that’s where the real ROI really comes in – in the improvement technology investments make to business performance.

3  Comments on this Post

 
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  • Tuomoks
    Not so simple, it depends. In 70's IT (IS) departments worked mostly as profit centers, independent (kind of), had to prove their existence and to show (mostly) positive return, had to compete with outside services to corporate organizations / departments, and so on. And it worked - even in 80's some still did that, even some government "computer centers" and companies governments participated were profitable - really has changed, or? Yes, today IT has lost its edge and IMHO by their own laziness, ignorance, whatever - the business professionalism has gone way down and the technology knowledge / usage is miserable, all they seem to know is how to buy bad products and services - sad! Partly I would blame just what the article says "Many companies use BI scorecards and dashboards as a formal means for measuring business performance in the enterprise. These types of tools allow companies to use data in a more productive way and better align technology goals with the needs of the business. " No tool or toy can replace or substitute to planning, strategy, etc - not even near but that's the way today, know how to push a button with no idea why?
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  • RobinGoldsmith
    ROI is the appropriate, necessary measure. Champy should know better but apparently falls into the common trap of assuming that ROI can’t be measured for technology investments. He’s correct that the return must be through the realized improvements in business performance; and those must be quantified financially to determine whether the technology investment is worth it.
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  • DBAndJ2EEInstruction
    1)Gain or loss based on Existing Cost Structure Cost of maintaining outdated HW and Software vs Cost to install and maintain new HW/SW 2)Gain or Loss of Customer Revenue based on either: Loss of business due to untimely or no response from customer base for supporting newer technologies Revenue gain realised when support for newer technology HW/SW to support existing markets and attract new customer markets
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