Like the stars of the night sky, project spending stands out in the enterprise technology budget: Both are obvious targets for observation and analysis but represent only the smallest and most obvious fraction of whats happening out there.
Maintenance, upgrades and other efforts are the “dark matter” of the IT universe—difficult to measure but powerfully shaping the whole. Project management tools and practices address only 10 percent of IT spending, according to IT economics consultant Paul Strassman, of Strassman Inc.
Where this is the case, a 5 percent improvement in nonproject IT efficiencies would increase by 45 percent the available funds for new IT initiatives.
Thats a powerful multiplier at a time when companies are getting ready to reinvigorate their IT investment cycles after a few years of dormancy or even decline. But IT managers will find themselves subject to greater financial discipline after the perceived excesses of the dot-com boom.
An ordinary spreadsheet can crunch the numbers, but it wont suggest the questions that need to be asked by an IT department before they are asked by the chief financial officer or CEO. Promoting greater visibility into IT investments and guiding analysis toward greater confidence in ones choices are the common aims of the IT portfolio management tools that eWEEK Labs reviews here—three good choices from a software category in which overall sales have risen by 60 percent during the last two years. (Data released in July by Gartner Inc. estimates that this category will soon become a half-billion-dollar industry.)
We found noteworthy differences in the origin and direction of the three products tested.
Artemis International Solutions Corp. delivers its Web-based Artemis 7 software in configurations aimed at several different domains, of which IT portfolio management is one. We found it running ahead of the pack in the area of aids for effective decision making, including tools for examining the effects of alternative strategies, and in its integration with related tools such as Microsoft Corp.s Project.
The Changepoint Corp. Changepoint 8.0 application offered the most complete transformation of the IT managers perspective on where time and money are really going, in return for a substantial effort at introducing and assimilating its measurement tools into everyday practice.
Alinean LLCs ValueIT is more narrowly targeted at bringing technology managers up to speed on the structure and vocabulary of documenting the business case and financial justifications for a project. It can make a significant contribution to project justification, moreover, with integrated research tools for putting a proposal into the context of whats being done by competing companies.
We should warn, though, that any of these tools can provide an accurate answer to a poorly stated question. The result could fool enterprise decision makers into going forward with an unproductive investment; it might also lead to killing an IT project because of what look like inadequate returns while ignoring the strategic consequences.
In particular, its essential that any questions about returns on investments be stated with reference to an appropriate “do nothing” case. The question of whether to proceed with a project might be stated as, “Will this investment increase our revenues?” The answer might be, “No,” and the project might be killed as yet another IT gadget grab.
But this way of asking the question assumes that the do-nothing case maintains the status quo. The question should rather be stated in terms of revenues with and without the proposed technology improvement. If competitors are likely to implement a technology and the project proposed is needed merely to stay abreast of that trend, then the comparison should be made between the foreseeable futures of staying in the game or falling behind.
When framed in terms of such likely future scenarios, the ROI on a project may look much better, even if the presentation does require some effort to sell to nontechnical managers who still dont understand the pace of IT change. The result, however, will be a better basis for making a technology decision. Managers should be given the information needed to choose among options that are defined in terms of incremental return on incremental investment, measured against a base case that is founded on research rather than wishful thinking.
All the products we review here support thorough analysis of new proposals, but none of them can alert the user to undue optimism about competitors lack of initiative.
Its also vital to correctly associate technology investments and support costs with the business missions that drive them.
If expanded capacity for online selling is needed to meet the surge of demand thats expected from a promotional campaign, then at least some fraction of that expansion cost should be cranked into the justification for that marketing effort. It would be misleading to weigh the expected revenues against the costs of only the directly related marketing activities, while leaving IT managers to defend their own resulting need for a budget increase against a skeptical or even hostile senior management.
Complete packages need to be accurately defined before the resulting numbers can be good guides to decisions. Again, all the products we review here can be employed along these lines, but none of them can warn the user of failure to make appropriate associations. Both the process orientation and the training workshops offered by Artemis make their value apparent when these issues are considered.
Products like these often enjoy brief honeymoons, driven by top-management infatuation, followed by loss of momentum when data collection distracts from urgent tasks. We therefore applaud the progress thats been made by Changepoint, in particular, toward sharing of data with the everyday environment of Microsoft Outlook as detailed in the accompanying review. This is the kind of integration thats needed for the industry to achieve Bill Gates Comdex promise of more productivity growth in this decade than in the history of IT to date.
The time is right for a new generation of IT management to unify traditional project-oriented cost/benefit analysis with process-oriented optimization of maintenance and upgrades. For the first time in years, eWEEK Labs observes both the need and the willingness to use thorough and objective measures of return on every aspect of IT investment—and at just the time that this can be done more comprehensively than ever before.
The Y2K imperative was “fix it, whatever it costs”; the dot-com imperative was “put us on the Internet, whatever it costs.” That one-two punch of IT extravagance set the stage for a reactionary swing in the opposite direction, when the dictum of the dot-com implosion became a command to cut the overblown IT budget no matter what the missed opportunities might be.
In all three of these minor epochs, spending was being driven up or down in absolute terms rather than using objective and consistent ROI criteria. By contrast, as IT spending trends return to modest but meaningful growth, the next few years represent the first time in more than half a decade that the opportunities of Internet-based IT can be explored in a rational atmosphere—one thats driven by ROI and the allocation of assets to the efforts that yield the highest return.
Technology Editor Peter Coffee can be reached at [email protected]