During the research phase of the Brainstorm CIO Directory, it emerged that many CIOs are still, in the wake of the global economic downturn, under enormous pressure to prove a return on IT investments, which is changing the way in which their departments and organisations conduct business.
"Before, if you needed a server because you were running out of space, you could just buy one," says Roopa Soma, IS manager at Sanofi South Africa. "Now, you have to justify why you need it and what the business impact will be."
This is putting a lot of pressure on the IT environment to come up with ways of cutting costs or finding solutions that save their companies money. "Capex is a luxury since every organisation wants to 'sweat the assets' and extend the life of existing infrastructure and solutions, rather than upgrade and replace," says Andre Maree, CTO at Nashua Mobile.
"What we see a lot of are opex-based offerings, either through financial instruments such as rental or leasing, or by converting the project requirement to a service model through SaaS [software as a service]," says Maree.
He adds that proving the value of an IT project to management is easy in some cases, but not in others.
'Soft' benefits
"Any solution that directly affects sales, expenses, efficiency, time to market and other measurable indicators can normally be justified with a clear and defendable ROI. With a solution such as VOIP/LCR, it's very simple to justify the ROI. Other solutions like CRM, which are based on difficult-to-measure-or-quantify 'soft' benefits, can be difficult to justify unless additional functionality such as sales force optimisation are included in the functionality, allowing for the ROI to become more clear and quantifiable," Maree states.
"In the case of core infrastructure, such as a new convergence-capable LAN infrastructure, the investment required can be a lot more difficult to justify since the ROI only becomes positive or palatable once the full benefits of convergence becomes a reality with the deployment of voice, physical security, access control or storage onto the same data LAN infrastructure."
There's lots of fault from the IT side - CIOs and IT managers tend to over-promise and under-deliver.
The impact of all of this, he says, is that many projects never see the light of day, because management cannot be persuaded that they will deliver a return. "In many cases where the benefits are significant but primarily intangible, we see projects being shelved or delayed when top executive management cannot be brought to see/accept the benefit," he says. "In cases where there's a lack of clarity of vision at executive level or where there's insufficient alignment between the strategic imperatives of the organisation and the objectives or deliverables of the proposed project, chances are the project won't proceed."
Difficulties
According to Morkel du Preez, a one-time IT manager who is now an advocate and IT and legal consultant, the demand for proven outcomes is not just a response to the global economic downturn. "There's lots of fault from the IT side - CIOs and IT managers tend to over-promise and under-deliver," he says. "Think about the debacle at the JSE, where hundreds of millions were spent on a project that can't get implemented. There have been so many failures. Businesses want to look at return on investment. Yes, it's difficult to measure, but that's what they want."
There's a lot of pressure on the IT environment to come up with ways of cutting costs or finding solutions that save money
Despite any difficulties this process may present, he says the streetwise CIO will find a way to measure. "If you can't measure, it's not worth doing. You can even measure retention of existing clients. IT people must be innovative and think of ways to measure."
Meaningful justification
Du Preez says that, in a lot of instances, IT wants to drive business, but it should be the other way around. "Lots of CIOs want to implement new applications at all costs, and try to sell it on how good it will be instead of looking at it as a business enabler."
He believes IT projects will only succeed if business is the driver.
Businesses want to look at return on investment, even though it's difficult to measure.
Soma says that, in addition to the requirement to demonstrate a measurable return on investment on IT projects, the time in which to do this has also shortened. "Not many companies will now accept a five-year ROI," she says. "Most now want two years."
She agrees that it's difficult to put a figure to the cost benefits offered by a project, because in a rollout that improves time and efficiency, the results will only be known once it's possible to assess how users will respond to the system. "Demonstrating a possible return depends on the methodology," she says. "For something like an improvement in market share, you can measure, and then measure again after the project, but then it's too late because you've gone through the process already."
However, she says that, in most cases, it's possible to provide some kind of meaningful justification. "CIOs have to keep their noses to the ground and know what competitors are doing," she says. "But there's an enormous benefit to not spending money without justification. Times are tough. We need new ideas from new people who are willing to go the extra mile."
She believes this kind of examination doesn't hinder IT innovation, "but it certainly makes the process longer".
First published in the June 2013 issue of ITWeb Brainstorm magazine.
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