Dan McLean: Firms still at a loss when it comes to measuring the value of IT

The more things change, the more they stay the same. Case in point being the realm of IT and its application.

The pace of innovation, particularly in the area of computing and networking infrastructures, has been break-neck, particularly over the past five to 10 years. This relative brief expanse of time has witnessed, among other things, multiple orders of magnitude increases in computing processor performance and hyper-accelerated speed upgrades to communication networks. Where less than 10 years ago most enterprise networks within Canadian business ambled along at sharing 10Mbps of performance, the standard today is 100Mbps at each desktop within most LANs – at prices that are lower than “shared 10” a decade earlier.

There certainly exists the potential to ramp things up much, much faster – to gigabit speeds and beyond. Consider the advances made in fibre optic technology, where single strands of glass, which a few short years ago carried one light signal, can now, through multiplexing, support tens of colour-separated light signal streams.

Literally every aspect of computing technology was driven way beyond what might have even been imagined only a decade ago. Processing, transmission and storage are among the IT capabilities advanced most dramatically, redefining not only the function of most applications and business processes, but also dramatically changing, as Cisco CEO John Chambers is wont to say, the way people work, live, learn and play.

The constants of IT innovation have been evolution and advancement. However, the way in which business measures value in IT remains relatively the same. That is to say that most businesses decide to invest based on immediate need in order to solve a business problem, but don’t attempt to assess the value of IT investments by measuring both the cost savings achieved and/or the additional revenues, which might be generated by such investments. Businesses might say they buy based on the perception of potential savings and greater efficiency, which might generate additional business revenue, but relatively few are actually attempting to measure these things.

That business demonstrates little interest in assessing return on investment (RoI) in IT is a repeated observation seen in a number of end-user surveys conducted over the years by IDC Canada. Although it’s purported that buyers are more closely scrutinizing the value and worth of IT investments before making purchases, the survey evidence would seem to conclude that such a notion is a fallacy.

A recent survey of medium and large Canadian business, for example, showed less than 20 per cent of companies admitting they attempt to measure RoI on network communications infrastructures. And those that do typically assess this return by gauging user productivity and satisfaction, which really isn’t about measuring revenues earned and savings achieved, but rather an attempt to stem the flood of complaints from a disgruntled user community.

In fact, for many companies, reducing user dissatisfaction is a compelling reason to make some IT investments. And while such reasons may have relevance for stressed-out IS departments, most aren’t measuring the value and investment return on such happiness.

So, why don’t businesses assess RoI in IT? Beyond the fact that such a concept is extremely difficult to measure in terms of benefits and savings achieved, many businesses continue to see computing as a black hole – an area of expense, albeit an increasingly more necessary one. Most companies realize businesses could not function without IT. However, that said, few Canadian companies understand or can precisely determine how much monetary benefit that might be gained from IT investments. While IT ideas and concepts are increasingly being sold to CEOs and other senior business executives, as always, the IS folks continue to make the vendor selections and final purchase decisions, particularly when it comes to network infrastructures.

So as IT continues to be ever evolving, most companies have yet to embrace the notion of measuring value in IT solution investment.

Changing ideas and attitudes, it would seem, is a lot more difficult than changing technology.

McLean is director of outsourcing and IT utility research for IDC Canada Ltd. in Toronto. He can be reached atdmclean@idccanada.com