ROI: It's about people, not numbers
- 18 January, 2002 16:53
Since Tellabs put in new procedures for measuring return on IT investment a year ago, "it's all been perfect," says CIO Cathie Kozik. Then she laughs.
The communications equipment maker, like most companies implementing new ROI measurement processes, has faced obstacles. The biggest have been resistance from an "action-oriented" staff, inaccuracy of business cases, lack of honesty from business managers who don't want to see budget cuts, and from staffers who worry that they'll automate themselves out of their jobs, explains Kozik.
"We wound up spending more time swapping e-mails about why we didn't want to do it than it took to do it," she says of one of the company's first projects that measured ROI.
Business unit managers, with help from IT, are responsible for determining project costs. But to overcome the honesty and accuracy problems, financial controllers from each unit oversee the calculations.
To reduce cultural resistance, managers keep business cases to a simple page or two. "Don't make it bureaucratic," Kozik advises. "Don't make it so long and laborious that people don't want to do it."
Implementing ROI standards must be a gradual process, Kozik warns. If Tellabs forced its ROI process on workers, "it would have collapsed under its own weight," she says. "Instead of going from 0 to 120, we're going from 0 to 30, 30 to 60."
Curtis Robb, chief technology officer at Delta Technology, the IT arm of Delta Air Lines, says there are critical issues that business cases must address to ensure ROI. The first is total cost of ownership. Each of Delta's business teams must develop plans that look ahead four years, he says. They look at not only the purchase price, but also additional factors like hardware, software, maintenance and support.
The second issue is finding the right level of support. For instance, a round-the-clock maintenance contract is wasted if users can wait a few days for a response. "Rightsizing" maintenance contracts has helped Delta shed $US10 million in expenses.
Standardising technology has also helped the company save on training and development costs. "Delta's airline operations unit was able to halve the development time on a project because it used standardised middleware from another project to build in real-time capability, as opposed to developing the technology from scratch," says RobbThe final issue is time to market. "At Delta, solution architects are assigned to projects from the start to help create a blueprint and determine a timeline," says Robb.