In these tough economic times, it seems like most IT leaders are talking tough when it comes to cost-justifying their IT investments. However, a new study suggests that it might be just lip service.
According to a new report published by New York-based Ernst & Young LLP, 79 percent of Fortune 1,000 IT decision-makers agree that financial justification of IT projects are important to them, yet only 40 percent conduct business case analyses on a regular basis.
The survey, conducted between May and July, was drawn from a survey of more than 100 CIOs, chief technology officers and other executives responsible for making IT investment decisions across a swath of vertical industries.
The reason behind the lack of follow-through? IT decision-makers often lack the tools, resources and time to conduct a full-blown return-on-investment analysis for most IT projects, said Chris Mazzei, a senior manager in Ernst & Young's Decision Analytics practice in New York and co-author of the report.
Still, financial considerations are becoming increasingly important for senior executives who make IT investment decisions. "I was surprised to see to what degree that's actually happening, in terms of the size of the project needing approval, who is involved in the approval process, etc.," said Mazzei. For instance, 80 percent of the respondents said that they have to cost-justify IT projects that cost less than US$100,000 and that many projects valued at less than $10,000 require a sign-off.
Meanwhile, IT decision-makers also expressed a lack of trust with the vendors they work with. For instance, although a solid 80 percent of the respondents said they expect IT vendors to quantify the financial value of their products and services, only 2 percent of those polled said they have a "high degree" of trust in vendor-supplied metrics. Those results are consistent across the industries that were covered in the survey, which included retail, consumer packaged goods, financial services, manufacturing, pharmaceuticals, telecommunications, transportation and logistics, energy and utilities, and communications and media, said Ashish Garg, co-author of the report and a manager in the Decision Analytics practice at Ernst & Young.
To enhance that trust, 59 percent of the respondents said they would prefer to receive more customized and detailed vendor-supplied metrics for the products and services they're considering.
The need to cost-justify IT investments to secure funding also appears to vary by industry. Transportation and logistics and communications and media rate financial justification of IT projects as more important than other sectors, such as energy and utilities and financial services, which trailed the pack.
In addition, respondents said financial justification is most important for IT security, customer relationship management and supply chain management projects. E-learning and mobile commerce projects were deemed the least important to cost-justify.