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News In Review

April 27, 1998

ROI In The Real World

continued...page 5 of 5

Also, read about these companies and their ROI programs:
Boston Beer Co.

Case Corp.

Elf Atochem

Hilton Hotels

Sears, Roebuck & Co.

Some IS managers say they apply "gut feel" to initiatives they view as strategic, essential competitive weapons. In these cases, they argue, it's more important to get the project moving than it is to measure its potential payback. "Some projects we do because we know the competition is doing them, or because the risk is high not to do them," says Robert Rubin, VP and CIO at Elf Atochem North America Inc., a chemicals maker in Philadelphia, who is normally a strong believer in metrics. "In those cases, we don't want to spend time getting loads of information beyond the point where we have enough to make a decision. The response has to be very rapid."

Speak Clearly
Similarly, says Joseph Smialowski, Sears' senior VP and CIO: "There are times when we make investments that are not held to as rigorous a review because it's something we need to do to gain a strategic advantage." But even in those cases, he adds, "We still need to articulate what we expect the returns to be."

But whether IS managers use detailed ROI metrics, informal payback estimates, or instinct, most agree it's essential that business-line managers be part of the assessment team for any major IT project. To that end, some companies are beginning to use a new "Value Measurement Model." The model was developed last fall by a working group of the Society for Information Management.

The SIM model is designed to bring CEOs, CFOs, business-division heads, and CIOs into the project-assessment process, explains Kinney of Kraft Foods.

For example, the CIO can view the investment in terms of hardware, software, and services required; the business-line partners look at productivity gains, cost savings, and effectiveness; and senior management investigates the overall return on investment.

Adds Kinney: "It takes the mystery out of IT."

View the accompanying research as a PDF file.

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