THE RoI LIES WITHIN

Ever since the deployment of computers, the issue of its economic viability

has always remained a subject of debate. The fundamental question of how do you

leverage the value of IT is perceived differently by different people. Some

define it as the availability of information on time, which is accurate and

complete. Others define it as the enhancement of productivity; reduced

deployment of manpower; lowering of cost, and so on.

Obviously, these perceptions are based on the quantitative or qualitative

aspects. However, irrespective of arguments, in its favor or against, one

consensus has always emerged that benefits of investment on IT have always been

realized, albeit, over a long period of time. Until the early nineties, the

relationship between an organization’s investment in IT and its impact on the

performance and productivity was never seriously measured. Three reasons can be

attributed for this:

n  Computers

were deployed for very voluminous, mundane and routine apps to save on clerical

manpower, which resulted in the improvement of productivity.



n  In the
absence of a robust, dependable and an integrated WAN most of the computerized

apps were limited in their scope. Almost, all the organizations had to deploy

multiple computing "islands" and enforce "integration"

through crude and conventional means.



n  Perhaps, the
most critical reason was one’s inability to segregate the benefits based on

"Deployment of IT" vis-a’-vis "Deployment of robust

processes". The problem was getting further compounded since the

technological platform was continuously and dynamically changing.

Post-liberalization, the impact of IT on every facet of business operation

has become apparent. Typically, today’s enterprises deploy one or more of the

following:

n  Enterprise

Resource Planning;



n  Supply Chain
Management;



n  Customer
Relationship Management; and



n  E-business
to facilitate the conduct of business over the Internet.

In essence, the role of IT has shifted from support to partnership. Today,

most of the Organizations are committed to spend more on IT and IT related

infrastructure. It is estimated that during the period of last year, almost $1

trillion (half of it in the US alone) has been spent on IT and IT related

technology to improve the white-collar productivity and remain cost effective in

the competitive environment.

However, on account of the magnitude of investment in IT, there is an urgent

need, to align IT spending with business objectives. It is estimated that today

over 80% of IT decisions require an RoI analysis and a very committed and time

bound plan to realize the benefits. These benefits need to be realized–both in

the short term (between one and two years) and long term (between three and five

years). The old paradigm that IT is an expense and RoI can be quickly calculated

as a break-even analysis is no longer valid. Spending on IT is identified as an

investment (like any other asset) and RoI is based on cash flow analysis. It is

also very clearly understood, that management, and not technology, will make it

a success or failure since it is the management of info-resources that makes the

difference in the fortunes of an organization. Integration of business issues

with IT solutions succeeds only when management is committed to ensure a smooth

transition of change management.

Measurement



This is the most difficult and challenging part. The results need to be

measured over a finite period of time and tabulated. They should then be

compared with the ones compiled in earlier periods.

Experts all over the world agree that computers do improve productivity.

However, the productivity gains are limited to the extent of the organization’s

commitment. Gartner’s study has revealed that substantial time is wasted by

employees in futzing with their computers rather than working on them. Plenty of

computer time is wasted in arranging and rearranging the files, creating fancy

slides for presentations, down loading data from the Internet and in playing

computer games. According to Gartner, it is estimated that futzing costs account

for almost a $100 billion in lost productivity.

But as Roach of Morgan Stanley warned–"Productivity is a trend that

moves glacially... You cannot expect instant payback from any input factor,

whether it is increased employment, better training, new technology or more

capital. It is just not going to happen overnight."

Arun Pande The author is vice-president (IT) with Colgate Palmolive (I) Ltd