As IT managers consider which technologies to invest in this year, they should exercise caution with supply chain and customer relationship management (CRM) projects but expect high yields from business intelligence (BI) efforts.
That's the upshot of a new report due out next week by Wellesley, Mass.-based Nucleus Research on the best and worst IT return on investment areas for 2003. The forward-looking study is based on a mix of customer case studies and vendor product road maps.
"We've seen companies throw a lot of money at CRM with minimal results when they fail to separate out the business objectives," said Rebecca Wettemann, vice president of research at Nucleus Research.
The possibilities for companies to overspend and lower their ROI "are greater with CRM" than other types of IT projects, said Nucleus Research President and CEO Ian Campbell. "Think of CRM as the Big Dig of the technology world -- you can go way over your head," he said, comparing CRM projects to the infamous highway construction project in Boston that's years past deadline and billions of dollars over budget.
To avoid that scenario, Wettemann suggests two rules of thumb when approaching CRM projects: Never spend more than twice on consulting what you've paid for the software and be sure to achieve project deliverables within six months.
Although she's not sure about those rules of thumb, Cathie Kozik agrees with the advice about being cautious with CRM investments. "I've yet to find a company that will acknowledge that they've achieved their expected ROI on any large CRM investment," said Kozik, senior vice president and CIO at Tellabs Inc., a Naperville, Ill.-based communications equipment maker.
"The most successful seem to have focused on delivering CRM functionality in meaningful pieces rather than going for a full-blown implementation," said Kozik, adding that her company opted to take the same approach "after looking at wins and losses at other companies."
Wettemann also said she believes there's strong ROI potential from investments in business intelligence tools, especially as pressure mounts on vendors to improve the usability of these packages in anticipation of Microsoft making a bigger splash in the market.
"I'm highly supportive of the BI recommendation. Most organizations have yet to exploit the value of their information," said Craig Luigart, CIO at the U.S. Department of Education in Washington.
There are also excellent ROI opportunities for big manufacturers with high-volume operations that are considering investing in radio frequency identification (RFID) tags to manage inventories and supply chains more effectively, said Nucleus' Campbell. But the entry costs for RFID are still high (about US$1 per tag), so it might be wiser for smaller manufacturers with lower production volumes to invest in other technologies "with an eye toward RFID in the future," he said.
"I personally believe supply chain management offers the best ROI given our current economic constraints, since it focuses on an issue with clear measurable costs where improvements can be measured and quantified to streamline current business processes," said Ron Fijalkowski, CIO at Strategic Distribution Inc., a $300 million supplier of manufacturing maintenance and repair parts.