Eighty-five per cent of IT organizations in North America are failing to meet their organizations’ strategic business needs. Only a fraction of companies are seeing visible returns on their e-commerce investments.
The findings are part of analyst Howard Rubin’s annual Worldwide IT Trends and Benchmark Report, which is based on interviews and surveys with 16,000 IT professionals at 6,000 companies in 28 countries.
“For most [IT] shops, the IT budget cycle takes six months to figure out how much they’ll spend in the coming year,” says Rubin, who holds several titles, including research fellow at Meta Group Inc. in Stamford, Conn. Rubin argues that the “old” way of allocating IT dollars doesn’t cut it in the digital age where IT departments need to be working hand in glove with business units to achieve business performance goals.
To succeed, Rubin says, IT departments must focus on the bottom line, collaborate with business units and customers at all levels, and actively manage their IT investments like fund managers.
Measuring the financial success of e-commerce projects is difficult to quantify for a few reasons, says Rubin. For starters, lavish spending on e-commerce initiatives doesn’t necessarily deliver profitable results. For example, even though the construction and engineering industry ranked sixth among 21 industries in terms of its e-commerce spending in 1998, the industry’s income growth actually declined by 22.3 per cent, according to the report.
To that end, strict return-on-investment measurements can’t be applied to e-commerce projects, Rubin argues, since so many other variables have to be factored in to determine a project’s success. They include the impact on customer relationships, intellectual capital growth, and organizational learning and process improvement.
Many observers think Rubin’s findings make sense. However, applying these ideas to IT management is a different matter, says Donald Drew, chief information officer at Ensign-Bickford Corp., a Simsbury, Conn.-based explosives maker.
Drew and senior management at his company have been wrestling with how to meet its customers’ educational needs while trying to protect technical documentation online. “Timothy McVeigh was able to learn how to build explosives (by using the Internet for research); we have to be very responsible about what we make available (online),” says Drew. Nevertheless, he says he believes there are some good opportunities to educate and market products to customers online even if there isn’t a clear fit for online sales at Ensign-Bickford.
Others agree with Rubin’s general assessment that IT organizations need to be more dynamic. “Our IS budget cycles take too long, and by the time a project has been approved for funding, the requirements have changed and it’s time to revise the plan,” says Marcus Armstead, an MBA who is currently doing a rotation at McGraw-Hill Co.’s technology group.