In this economic environment, buying technology because it's new or because of its "cool factor" just doesn't fly.
With IT budgets remaining tight, businesses demand to know why funds are being invested in particular places--and, what return they should expect from those investments.
Business-savvy CIOs understand that when it comes to emerging technology, any investment needs to have a rock-solid--and preferably, quick--return on investment to get the go-ahead from the business. And the best ones know how to harness their business acumen and IT know-how to discern which new technologies will truly help their organizations meet business needs.
"Buying a technology solution today without understanding how it will impact your business at every level is a perfect example of putting the cart before the horse," says Jon Stevens, CIO at CDW.
See Also: 4 Tips for Evaluating New Technologies
While plenty of new products are designed to help improve business processes, CIOs need to demonstrate how their implementation will affect overall business goals, he says.
And even as the economy improves, it's not likely that companies will stop carefully scrutinizing their new IT investments.
"Even in good times, CIOs shouldn't be buying technology for technology's sake," says Jackie Fenn, a VP and Gartner fellow specializing in emerging trends and co-author of Mastering the Hype Cycle: How to Choose the Right Innovation at the Right Time (Harvard Business Press, 2008). "The technologies [implemented] need to address core business needs and goals, particularly if they are at the earlier stage of their maturity cycle and therefore higher risk."
It's only worth taking a high risk if there is a high return, Fenn says: "If not, you might as well wait for other companies to learn the hard lessons and adopt the technology later when it is better understood."
Building the Business Case
Stevens generally gets business buy-in for purchasing decisions that have the potential to improve the business and enhance service to customers. In perhaps the most notable example, about five years ago the company began looking at virtualizing its servers to create a more efficient way to store all corporate and customer data.
"We ultimately decided that if we moved to virtualization, we'd be better able to utilize our hardware and data center space, and reduce costs associated with the physical storage equipment," Stevens says. Today, more than 60 percent of CDW's servers are virtualized, and the technology has allowed the company to expand its data center business.
Stevens and his team also got the green light to invest in social networking because the company expected business gains. Over the last two years, CDW saw an opportunity to create internal networks and blogs to help account managers communicate directly with customers.
"This has helped create new conversations around products, services and overall solutions that have helped us build stronger relationships with our existing customers," Stevens says.
For CenturyLink CIO Vercie Lark, presenting a business case for a new IT investment has become standard operating procedure.
Earlier this year, before a merger of Embarq and CenturyTel created the local exchange carrier CenturyLink, then-Embarq CIO Lark set out to implement software from Jacada to automate a variety of call center processes. The aim: to reduce the time it took customer service agents to handle incoming calls. At the time, agents struggled with inquiries because there was no integration among the 15 applications they used.
In addition, Embarq wanted to cut the amount of time it took agents to boot up their computers and begin working with customers. It typically took 15 minutes for agents to boot up and log in to all the applications before beginning to take customer calls.
Lark partnered with members of the call center and repair center to build a business case showing how implementing the software could pay for itself within six months by significantly cutting call-handling times and initial login times for agents. The ROI analysis calculated how the time savings would translate into increased productivity for agents, Lark says.
His team got approval, and the company deployed the software between December 2008 and April 2009. The result? The call-handling time dropped from an average of 45 seconds to 15 seconds, and initial login times for agents decreased from 15 minutes to two to three minutes. As predicted in the business case, the application has already paid for itself, Lark says.
While that particular business case provided hard ROI, many times business cases for technology investments don't include hard returns, Lark says.
For example, Embarq launched a data warehouse re-engineering project at the beginning of 2008 to provide faster and more accurate information to the marketing department. That helped the marketing team create more effective campaigns.
The business case didn't provide a hard cash return. Nevertheless, senior management was satisfied with the business case because it helped meet the company's goal of improving its ability to see and adjust marketing campaigns weekly rather than monthly.