Magazine Article | December 1, 2002

Your Metrics Are Misleading

Source: Field Technologies Magazine

ROI is the key driver when you spend technology dollars. But, is that obsession clouding your judgment when it comes to choosing IT projects?

Integrated Solutions, December 2002
Ed Hess

If your company's fiscal year begins anew on January 1st, then you're probably spending this last month of the year lobbying for an extra buck or two in your 2003 budget. (If your fiscal year starts at some other time, the point still applies.) What happened to the days of double-digit increases in IT spending? IT spending was strategic, and the projects you presided over provided your company with a critical competitive advantage in the marketplace. Now, if you're in tight with the powers that be, you might see a 3% raise - and, "be happy for that," adds your boss as he rambles on about budget cuts and layoffs at other parts of the company. You nod attentively, as you feign listening, and begin thinking about where to spend your newly minted money.

ROI Formula Has Many Variables
Of course, you'll be looking for projects that deliver massive ROI. That's a given, now that pet projects and high-status, visionary IT ventures are practically banned. So, you'll turn to the trusted metrics. You'll compare current costs against the expected savings following a technology insurgence. Then, you'll make the call - write the check or look for another project.

Before you get too tangled up in spreadsheets, consider that there are areas within your company that need a technological infusion so badly that forecasting ROI might not even be possible. In fact, the best justification for such implementation might just be intuition and common sense. In most cases, you'll be eliminating costly and error-prone manual processes. For instance, your warehouse employees are still toting clipboards and reading from manually generated pick lists. Or, you have a group of employees keystroking data from paper forms to update databases instead of taking advantage of forms processing technology. Take a look at your contact center; your agents might be handing off calls to other personnel because they can't get their hands on the right data. Worse yet, you might be incurring callback charges and delaying customer service.

In all of these cases, you might be able to cobble together some numbers to predict ROI. But, in most cases, the numbers will only support what is obvious to a person involved with business technology - something desperately needs to be done, and now.

No Metrics Might Be A Good Thing
In this economic climate, all technology expenditures must be justified. But, such projects shouldn't be shelved because proper metrics are tough to come by. In fact, it's these projects that typically require the greatest attention. If you can't measure warehouse productivity or some level of customer service, that's not a sign that all is well within that department of the company.

Last month, Integrated Solutions featured two companies that spent big money on technology without calculating a return in every imaginable way. In both cases (Seattle Coffee Company and Sara Lee Household & Body Care - USA), the sentiment was the same: "We knew what we had in place and what was available. And, there was a huge difference between those two points." In the end, it was those differences that provided all the material needed to fight a justification battle with the bosses.

This is not a call to strike ROI from your thinking as you pore over your new budget numbers. Hardly, since ROI continues to be the driving force behind most technology dollars spent today. But, in some cases, ROI needs to be put in a different context. It might not always be clean. Every variable in the equation might not be known. That doesn't mean you won't realize an ROI. It might just mean that you can't begin to calculate how massive it will be.