InformationWeek
Defining The Business Value Of Technology
November 17, 1997
Where's Return On Investment?
here's a new way to think about and assess the business value of IT. This new philosophy of return on investment-pushed by several academics and analysts, and adopted by a cutting-edge group of IT managers-says it's the things that are most difficult to measure that matter most of all. "There's a need
for new metrics that go beyond the traditional industrial-age measures that focus on cost analysis and savings," says Erik Brynjolfsson, an associate professor of IT at MIT's Sloan School of Business, a visiting associate professor at Stanford Graduate School of Business, and a leading proponent of the new ROI thinking.
These new-age ROI measures focus on things such as product quality off the assembly line, customer satisfaction after an interaction, and faster time to market. These factors reflect a company's real sources of value, and they're also what customers truly care about and are willing to pay for.
Once these factors are isolated and measured, proponents of new-age ROI measures add, companies can better assess how they're supported by IT. "Technology by itself doesn't do anything," says Robert Benson, a professor of information management at Washington University in St. Louis.
"It's what the organization does to use information and reach out to customers that matters. The purpose of IT is to change the behavior of its users to better achieve their business objectives," Benson says.
Because this approach to ROI is so new, there are no measures of how many companies actually use it as the basis for their IT-buying decisions. But there's no doubting that some CIOs are already giving the "intangibles" theory a shot.
One such pioneer is Gene Trudell, general manager of computer services for U.S. Steel Group, a Pittsburgh unit of USX Corp. "We're making IT investments with the expectation that there will be a payoff in customer satisfaction," he says.
Story's author: Bob Violino
Read it on the Web at: techweb.cmp.com/iw/637/37iucov.htm
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