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23. This is based on my own experience in initiating, managing, and terminating outsourcing agreements. 24. Stacey Hall and Jan Broqniez, Attracting Perfect Customers: The Power of Strategic Synchronicity (San Francisco: Berrett-Koehler Publishers, 2001). 25. See note 24 above, pages 18 19. 26. And, especially, my own personal experience. 27. Casey Powell, CEO of Xiotech and founder and former CEO of Sequent Computer defines the right choice as the choice you made once you had the facts. What makes it the right choice is that it is the one you made as opposed to the best choice which is an idealistically perfect choice though rarely if ever attainable.
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chapter
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Managing for Returns on IT Investments
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by michael hugos and joe stenzel
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In a free market economy driven by the competing interests of shareholders and a variety of stakeholders, executive leadership at all levels shares a common accountability: use available resources to achieve the best possible outcome. This book concludes with a discussion of resource decision making that ties together the ever-widening circles of IT influence from its strategic core. IT architecture, tactical agility, and strategic cost, performance, customer relationship, and outsourcing management each enable an organization to align, implement, and realize its strategic objectives. The art (and expectation) of executive leadership is to make decisions that unify and coordinate these many activities and grow the resources that support them. Unfortunately, conventional ROI calculations were not designed to capture the increasing complexity of the recent emergence and rapid evolution of strategically deployed information technology resources. At the same time, enterprises expect the CIO to make wise investments without understanding the scope of these investment responsibilities. This chapter has two objectives: (1) demonstrate the ways that executive leadership can use conventional ROI calculations to improve decision making for IT project proposals; and (2) explore new perspectives on IT investments and arrive at ways that the CIO can help other executives manage and maximize
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more broad-ranging, elusive, vaporous organizational resources and achieve a return on intangibles. Part 1 discusses the IT ROI challenges faced by the CIO who seeks to create systems and link resources that enable execution of the company s business strategy. These challenges include scope, risk, responsibility sharing, strategic precision, and local and enterprise-wide work implications in terms of new IT project proposals. Part 1 also addresses the essential elements that the CIO uses to see the ROI process through from start to finish. This includes: the joint development process between IT and Finance; a cost/potential benefit analysis; an IT ROI benefit audit; ways to weight tangible benefits; and the reapplication of people and resources freed up by the project. Part 2 explores the rapidly emerging importance of intangible IT resources from the marketplace to the boardroom. Building on intangible management best practices from IT, Human Resources, and previous chapters, this discussion addresses practical ways that executive teams define, identify, measure, valuate, and renew their intangible IT resources.
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part 1 by michael hugos is this project worth doing
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The ROI answers the question, Is this project worth doing The process of calculating the ROI builds the consensus among business and technical people. The IT people who will build the system are responsible for estimating the costs. The business people who will use the system are responsible for estimating the benefits. With the help of the CFO, Finance people are responsible for setting the financial parameters such as company cost of capital or the discount rate to be used in evaluating the value of the project. These three groups in any enterprise must come together in a common process to decide whether a project or a new IT investment is worth doing. Everyone whose budget will be affected by the project should have an opportunity to review the costs and the benefits of the project.
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