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April 5, 2003

The Promise

"Strategic" and "ROI" are no longer mutually exclusive terms

by Justin Kestelyn

Remember the halcyon days of the late 1990s? In those days — and they seem to be 5,000 years in the past rather than only five or so — IT investments in ERP systems, business intelligence (BI) applications, enterprise integration frameworks, and other strategic solutions were considered part of the proverbial "cost of doing business." The best evidence for this conclusion is the fact that few implementers bothered to analyze the return on investment (ROI), whether based on "soft" or "hard" metrics, of successfully deployed solutions (which were uncommon anyway).

These studies are still too few in number, but nobody can deny that the ROI calculus is now a major influence on purchasing decisions, even so-called strategic ones. Lacking elaborate financial justification, the sacred cows of yesterday are today's hamburger.

Nucleus Research has just released its 2003 Technology Almanac (see www.nucleusresearch.com/pr2003ta.html), and its content is notable not so much for its specific observations, some of which are striking (more about those in a moment), but for its unifying premise: Strategic IT should now be evaluated strictly on the basis of ROI. In fact, Nucleus calls the report an effort to sort out "solid opportunities for increased ROI from the annual batch of empty promises."

Nitty Gritty

The Almanac has several interesting things to say about ROI, at least one of which calls IT solution provider marketing strategies into question. Here's a quick overview:

Analytics work. According to Nucleus, analytics are the key to garnering ROI from CRM solutions. The report boldly claims "Companies whose annual sales revenue is greater than $100 million or whose enterprise data is highly centralized are almost certain to achieve positive ROI with analytics software."

Not the complete package. Nucleus says 2003 "is not the year when large companies can stop customizing their software or building their own applications from time to time." Similarly, although medium-sized companies are "well-suited for broad, turnkey solutions" from a single enterprise applications vendor, the authors say that such solutions will soon be unmasked as "fantasy" because of their propensity to require further customization.

"Smarter" means "more profitable". Discussions with CIOs and IT managers reveal that BI solutions have a genuine, quantifiable impact on their bottom line; according to the report, four-fifths of interviewed Cognos Inc. customers "had already achieved" good ROI.

Nucleus kicked up some dust late last year when it delivered research suggesting that most Siebel Systems Inc. customers failed to achieve positive ROI. Clearly, that goal is the primary focus of strategic IT today.

Farewell To Arms

And now, a different kind of conclusion: This is my last column for Intelligent Enterprise; by the time you read this, I will have begun work as the new chief editor of the Oracle Technology Network.

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In my five years as executive editor and editor-in-chief here, I have learned a great deal about the issues and concerns that are foremost in your minds, and for the privilege of that knowledge and insight, I will always be grateful. Best of luck in your efforts to create and continually improve your intelligent enterprise.