Commentary: Tech investments don't always add to bottom line

As the economy boomed in the late '90s, so did spending on technology that promised to power e-commerce, improve customer service and manage productivity. Studies show though that many executives feel they didn't get much of a return on those tech investments.

According to Morgan Stanley, U.S. companies spent $130 billion in the past two years alone on unneeded software and other technology. Worldwide, companies throw away as much as 20 percent of the $2.7 trillion spent annually on tech, estimates research firm Gartner.

It happens because companies frequently stampede into technology buying decisions. Following the herd, they purchase software and hardware with too little planning and research. After all, if a particular program improved customer service at a competitor, it will do the same at your company, right? Wrong.

Quick buying decisions

Budgets for tech spending were high during the past few years, if a budget existed at all. CEOs wrote blank checks to their MIS departments without asking questions such as why are we doing this and what goals are we accomplishing. The myth was that tech had the ability to resolve organizational issues with its magic wand. As a result, many companies overbought and paid for features they really didn't need.

Without taking the time to define goals upfront, organizations set themselves up for failure. If a project is embarked upon without these goals and metrics, how will it be measured for success or failure?

Success metrics help ensure that a defined set of standards is used to determine if the technology deployed is meeting an organization's needs and if the investment will have a return. Joshua Greenbaum, principal of Enterprise Applications Consulting, an enterprise software consulting and analysis company, suggests you ask yourself the following questions:

* What is the problem today?

* What is the cost to solve the problem?

* What does it cost to build or offer the service in house?

* What does it cost to build it or to offer it outside the company?

* Are there technical issues to be addressed?

* Can direct sales or other income be attributed to the purchased item and its supporting structures?

* Will use of the item result in direct savings to the company or from improving related company processes?

After answering those questions, Greenbaum also suggests that costs should be identified including the cost to acquire, maintain and upgrade the cost to use and the cost to train.

Cultural and politics

Although it's hard for many executives to admit, the failure of technology initiatives is frequently due to internal issues that have nothing to do with the actual technology. The bigger the company, the more rules and processes there are. People on all levels of the organization need to compromise and work together when adopting new technology because you're changing processes as well as the culture.

Make sure before embarking on installation of new technology that there is buy-in at all levels of your organization. In addition, communicate throughout the company what problems have been formally identified that the technology is going to help resolve so that people understand why you're making the investment.

You will also want to have a plan in place for training everyone in your organization who will use the new technology. Will an internal evangelist of the change do your internal training or an outside consultant?

In addition, consider making use of the new technology the law. In my experience, successful implementation is achieved when the new system is championed by an organization and its use is mandatory, as well as logical. When the users adopt the new system based on perceived value to themselves and their tasks, the implementation is marked as a success.

Poor deployment

Many companies believe they can install new systems and immediately reap the benefits. However, deployment of new technology can take months and tangible results even longer.

If your internal team is responsible for getting the new system up and going, make sure you've defined deadlines, outlined expectations and established performance rewards. Hit predefined rewards measures and you will be able reap the benefits. Miss it, no bonuses.

The same checks and balances should be in place if you've hired consultants. Make sure contracts have performance measures in place as well as penalties for not achieving installation deadlines or stated goals. Also, be sure that the contract includes a formal testing stage and review process.

It's not unusual for customer relationship management, or CRM, software vendors such as Siebel, to contractually commit to make sure customer's CRM deployments are successful. Many CRM vendors now have staff dedicated to helping companies implement their CRM strategies internally. After all, it doesn't do the software vendor any good if a customer feels they haven't reaped the benefits of installing the program.

Despite a shaky economy, several recent studies indicate that companies will continue to invest extensively in technology in the coming months. Surveys show that companies will be focused on developing and updating internal systems that they hope will quickly impact the bottom line. Like any other investment your company makes though, maximizing the return on investment on your tech investments requires a clear identification of the problem, establishment of goals and putting in a place a well- defined plan for implementation.

Scott Jones is director of Strategic Consulting with Phase 2 Development, an Oklahoma City-based application and Web developer. You may reach him by phone at 232-4545 or by e-mail at [email protected].

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