It's now 2003, and there continues to be considerable fanfare about ROI. Much of it revolves around getting technology vendors to pay more attention to stating their value proposition more clearly... and in fact, quantifying it, states a Gantry Group Newsletter from January 20, 2003. This is one giant step in the right direction. After years of hype and frivolous buzz marketing, massive marketing program realignment in the technology sector is definitely in order. A refreshingly simple market premise is now prevailing: Tell customers and prospects exactly how, and by how much, you can positively impact their businesses.
But how are enterprises coping with all this carefully crafted statistical ROI data from vendors? How do the buyers of this technology, assess this performance metric data? How do enterprises assess the payback of their current technology acquisitions? And how do enterprises apply ROI to make prudent future technology purchases?
This process is quite overwhelming for many enterprises. Most are drowning in ROI and TCO data, without a clear, tangible means to interpret, assess and compare the IT value proposition claims between bidding vendors. However, now more than ever, CEOs are mandating that CIOs demonstrate how IT investments will increase shareholder value. In fact, according to Information Week, "82 percent of IT decisions now require an ROI analysis."
With all good intentions, many enterprises have taken it upon themselves to wade through and analyze this data for themselves. Unfortunately, according to a recent Jupiter Media Metrix study, almost 60 percent of companies may be misleading themselves by attempting to calculate ROI in-house, often generating "false positive" results. The problem in these "do-it-yourself" ROI assessments stems from unconscious bias and inconsistent definitions of ROI metrics in an effort to prove out positive results. This makes it quite difficult to realistically justify those technology initiatives that should be funded from those that should be closed down (or not made in the first place). The morale of this story is "wishing does NOT make it so!"
But it wasn't long ago that ROI was not even a consideration in the procurement process. Let's take customer relationship management (CRM) as an example solution sector. META Group has found that only about 10 percent of organizations have done any sort of ROI analysis for CRM systems. Commensurate with this data point, CRM project failure rates are quite high, ranging from 25 to 77 percent. Tight budgets have spurred executives to shift from a "leap of faith", "competitive, me-too" technology purchasing strategy, to quantitative ROI justification. In this age of full disclosure, ROI not only keeps the sales pitch honest, it also aids supports fiduciary responsibility that IT executives must now take on.
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