Getting the Biggest Bang for Your IT Buck
Return on investment isnt always clear, but general trends are identifiable.
Based on what companies are buying, customer relationship management software offers the most near-term value, says Jon Ekoniak, an analyst at U.S. Bancorp Piper Jaffray. ROI in this area can take nine months to two years to appear, but there is a lot of potential. However, ROI is less effective if employees are not trained and encouraged to use the CRM software.
If one considers two years short-term, then supply chain software buyers have to be patient, Ekoniak says. Installing this software is a difficult and slow process, but users have reported inventory reductions of 20 percent or more, doubled inventory turnover and cycle times that plummeted from months to weeks.
E-procurement also offers promising ROI, but its pace has slowed recently. Where vendors and analysts once talked of ROI in the range of 20 percent, today its more like 5 percent, says Laurie Orlov, an analyst at Forrester Research. "Deploying this process is a lot harder than originally projected," Orlov says. The original savings were overblown. But the value proposition for e-procurement is still there, because it gives companies more control over what employees buy.
Aberdeen Group issued a research report last week that says e-procurement is, in fact, living up to its billing. Tim Minahan, an analyst at Aberdeen, says companies deploying the software experience a 73 percent reduction in transaction costs, a 70 percent to 80 percent reduction in purchase order processing cycles and a 5 percent to 10 percent reduction in prices paid. In real dollar terms, he says, a midsize company can expect to save almost $2 million per year through use of the technology.
Enterprise application integration software is another popular choice because of the great need for computer systems to talk with one another. The ROI for such applications is harder to measure because its infrastructure.
Enterprise Resource Planning software is growing, but slowly. Human capital management, used to deploy workers on a companys projects, "looks like it will be one of the fastest-growing areas in the applications space," Ekoniak says.
Collaboration and product life cycle management software are two other categories that attract less attention.