July 2006 Survey: The Bitter Truth About ROIBy Allan Alter | Posted 08-04-2006
After running surveys on ROI in 2003 and 2004, we decided to take a sabbatical. Despite the ongoing pressure to demonstrate the business value of IT, progress doesn't come swiftly in the field of measurement. So it made sense to wait to see if we could spot real improvement.
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Yet after two years, truth be told, there's little change in how, or how well, IT's value is measured. True, most firms now try to use metrics such as internal rate of return, return on assets, net present value, or activity-based costing. But besides customer satisfaction there's no consensus or consistency on which measures to use. It's still not a given that ROI should be measured both before and after a project. And half of all executives surveyed, whether IT or business executives, doubt that the measures are even accurate. Consider productivity: IT executives are projecting significantly greater productivity increases than the figures tracked by the federal government. Somebody's not measuring productivity properly, and it's probably not the Bureau of Labor Statistics.
Yes, measuring IT's value is difficult. But why haven't more companies found a satisfactory way to do it? Is it that companies just don't feel the need to calculate IT's value accurately? The motivation ought to be there, given that three-quarters of our respondents are under greater pressure to put a dollar value on IT's intangible benefits.
But, judging by how few measure ROI after a project, it seems that for many IT executives, what really matters isn't whether the valuation is correct, but that it's convincing.
What's the Value of IT? At Many Companies, It's Just Guesswork
IT Value, Productivity Metrics Still Not Trustworthy
Most Companies Struggle to Measure the Value of IT
IT Is Delivering Business Value, But Some Technologies Succeed More Often Than Others
How the survey was done: CIO Insight editors designed the 2006 Business Value of IT Survey together with Equation Research, LLC (www.equationresearch.com), an Estes Park, Colo.-based supplier of custom research services. IT executives gathered from Ziff Davis Media publication lists were invited to participate in the study by e-mail. The questions were posted on a password protected Web site, and 303 qualified respondents (83 from companies with revenues in calendar 2005 below $100 million, 130 from companies with revenues between $100 million and $999 million, and 90 from companies with revenues of $1 billion or more) replied from May 3 to May 22, 2005. Of the respondents, 156 were the top IT executive of their company, 89 held senior IT executives titles, and 58 were executives from outside the IT function.
Read our previous surveys on ROI and business value: