Profiles

PARTNER PAYBACK

Douglas Oberhelman
CFO
Caterpillar Inc.
Peoria, Ill.

"Most of what we develop is for various business units. Since the units pay for this, they make absolutely sure they get a return. IS projects are critical to our success, and they are very visible within the company.

Some projects don't have business-unit owners but are handled within IS as what we might call an R&D capacity. But even here, we use a review board to assess every project and make sure we get our money back.

It can be difficult to come up with an ROI calculation in the traditional sense. So we have to take other approaches, and we assess projects based on their potential.

We also partner with several universities that are exploring the frontiers of IT. This keeps us close to the cutting edge without our having to invest huge amounts in every new technology in the hopes that it fits our business.

And we work to make sure that all of our systems integr ate well. That way, we avoid underwriting separate systems that don't communicate with each other.

SOLID ROI

Photo of George Orlov George Orlov
VP and CIO
Unicom Corp.
Chicago

Most of our larger application-development efforts are required to provide a definite ROI. For example, of five projects we have going on that are $30 million or more, three have a solid ROI based on operational return. Another is necessary to satisfy a regulatory requirement, and the fifth is a financial application we need to stay competitive. We're moving to a new accounting method, and we need systems to support it.
We use a Strategic Analysis Group to determine the ROI of our proposed projects. They' re the same group that provides ROI for other units within the company. So there's no modifying of terms or definitions when it comes to IS projects. We're evaluated exactly the same way.

YEAR 2000

Photo of Mike Tiernan Mike Tiernan
VP, year 2000
Credit Suisse First Boston Corp.
New York

When you're dealing with a specific mission such as that posed by the year 2000 [date-field problem], then ROI really can't apply. We need to address the year 2000 simply to stay in business. It's a big expense just to keep things running, but we have no choice. ROI is more applicable for other areas of IT, but it's often difficult to measure. Sometimes you develop the ability to do things to stay ahead of your competitors, but calculating the exact return is almost impossible.

REENGINEERING

Photo of Mike Radcliff Mike Radcliff
CIO
Owens Corning
Toledo, Ohio

For our recent Advantage 2000 initiative, we engaged in the "concurrent reengineering" of three business processes. We made sure to define success up front in quantifiable terms.
For example, we projected improved earnings quality in seven different areas, from materials cost to order management. We then calculated how they would improve each year between now and the year 2000. We also compared the cost of the project with the cost of maintaining the status quo and found that we would spend less by making these chan ges-and achieve a 60% initial rate of return.
Beyond the ROI, we also looked at how we could boost shareholder value on an earnings-per-share basis, and how we could improve outcomes ranging from an integrated supply chain to a paper-free environment.
One thing is clear: IT can't lead these efforts-they must be motivated by a strong business imperative. We spent $100 million over two years on Advantage 2000, and we're seeing immediate returns.