Sunday 25th Oct 2020 - Logistics & Supply Chain

There’s more to IT than RoI

[asset_ref id=”209″]They say what goes around comes around and this is particularly true of information technology, which on the surface seems to be a series of innovations. On closer inspection many of the new ideas in IT are in fact recycled old ideas and much of what passes for novelty in the field is often just a swing of the pendulum.

One year centralised IT is the latest thing, the next distributed computing is the only way to do it. First collaboration is the flavour of month, then it is superseded by the notion that it is a better policy to keep your Crown Jewels under wraps.

IT suppliers have been pushing the idea over the past couple of years that cost is the only thing that matters in IT decision-making. Return on investment is the touchstone of IT buying decisions, we are told.

The view of IT as a commodity gathered momentum earlier this year when the Harvard Business Review published an article by Nicholas Carr called Does IT Matter? Carr argued that IT was strategically irrelevant and that companies should delay IT investments, cut budgets and avoid new technology.

The pace of development in IT, Carr claimed, had plateaued in the same way that developments in railway or automobile technologies did in earlier times. Predictably there was a certain amount of rubbing of hands at the prospect of nerds like Bill Gates getting their comeuppance.

A contradictory view
However, research from QNB Intelligence contradicts this strictly financial view of IT. After talking to some 1500 IT professionals and corporate decisionmakers in the UK, QNB has concluded while cost is an important consideration, it is by no means the only one. Furthermore, the research confirms that cost is often fairly low down the list of significant drivers for investment.

Only 40 per cent of organisations in the survey consistently incorporate return on investment calculations into their business cases. For the rest, it is optional. Contrary to popular belief amongst the supplier community, corporate buyers are not slaves to prescriptive spreadsheet-driven decision-making.

Those organisations that do make RoI calculations generally expect payback periods of between 18 months and two years. The need for six monthly payback on investments is a myth, says QNB Intelligence, and the obsession with such short-term thinking by many IT suppliers is likely to harm their credibility with IT decision makers who think more realistically.

Whether drivers such as RoI and total cost of ownership are considered by IT customers or not, the majority of organisations incorporate non-financial drivers into their business cases. This is true for all types of IT investment from bigticket enterprise applications to commodity hardware and operating systems.

Almost a third of organisations are willing to relax the rules to allow early investment in strategic new areas such as wireless where benefits are not yet fully understood. Experience gathered during pilots and initial rollouts is then used to construct the business case for broader commitment.

So what should we make of the news that price isn’t everything? Cynics might say that the Brits always fight shy of talking about money and that QNB Intelligence has not been told the whole truth. More likely is that the low ranking of RoI is a reflection of the difficulty of making the calculations. Information economics is a nascent study and there is still a great deal of uncertainty about the best method of quantifying costs and returns in IT.

It is also perfectly possible for companies to operate in two ways at the same time: holding down or cutting costs on established applications while taking a punt on new applications with a big prospective payback. Parcels firm FedEx recently claimed that its track and trace website saves some e25 million per month over providing that same information via a conventional call centre.

Then again the enthusiasm for return on investment may have just been a reaction to a long period of unbridled expenditure of IT, much of which did not deliver clear benefits. Once buyers felt they had made their point they were willing to go back to their previous approach to IT.

Whatever the reason, one thing is clear: most users are still prepared to take a gamble on their IT.

Get Weekly Logistics & Supply Chain News
Get Weekly Logistics & Supply Chain News
Thank you for your subscription