How valuable is your IT department?

Summary:For 30 years or so technology folks have heard the song and dance about "business alignment," or putting some hard numbers on IT projects. From the looks of things, you'll be hearing about alignment for another 30 years.

For 30 years or so technology folks have heard the song and dance about "business alignment," or putting some hard numbers on IT projects. From the looks of things, you'll be hearing about alignment for another 30 years.

That's one conclusion of a roundtable hosted at Temple University on Tuesday. The panel consisted of Jazz Tobaccowalla, Wyeth, VP of research and development IS; Eric Dzwonczyk, senior IT director global R&D and new product development at Campbell Soup Co.; Andy Lay, senior manager and systems engineer, corporate process improvement at Lockheed Martin; Milan Kunz, VP of process and systems improvement IT at GlaxoSmithKline; and Arjun Bedi, partner Accenture.

The big question: Just how valuable is IT? And can you measure it? And then can you market it internally? Remember, successful projects are business wins. Failures usually get blamed on IT.

Among the key themes:

Defining value of IT: Lay operates what is essentially a swat team within Lockheed Martin. Lay's team tries to improve processes--including technology ones--across all of Lockheed Martin.

When it comes to returns on technology, Lay has three simple rules.

"Value comes from the customer point of view. It's based on what the customer identifies as value add," says Lay. Generally, if a technology project doesn't meet the following criteria it's not worth doing:

  • Will the project create something customers are willing to pay for? If not, the project may not make sense.
  • Will the project make sure something is done right the first time? IT has to improve processes to the point where rework is minimized.
  • Will the project affect product or service directly? To wit: A snazzy new weekly progress report doesn't add value to customers. Retooling manufacturing systems would if it gets product to customers quickly.

Using metrics: Everyone on the panel said it makes sense to judge technology projects based on business metrics. Boiled down that means two measurements: Reduced cost and increased revenue. This fact also requires partnering with business units since process changes provide much of the value.

Dzwonczyk noted that there is "no such thing as an IT project. They are all business projects."

Kunz's key metrics at GlaxoSmithKline for IT is no capital expense and returned value. Kunz's boss challenged him a few years ago to do 20 such projects a year. He did 35. From that start, GlaxoSmithKline now sets financial targets. The goal: Cover the cost of inflation with technology.

Tobaccowalla, however, added that you can't get too nutty with metrics especially at the beginning of a project given some returns are softer. "You have to figure out what you assume to be the baseline. If you can measure it fine. But if you can't make it up. If you have to spend six months to find a baseline it's not worth it. Ultimately it's about the value the customers think they have."

Lay added that metrics are a constant source of tension between business and technology. For instance the upfront investment is easy to quantify, but expectations for returns need to be managed.

Marketing technology successes: Tobaccowalla noted that since technology is intertwined with business project managers have to get better at internal marketing.

"Remember every value is a business project. Every time it's wrong it's an IT project. Amongst all the metrics you put in don't forget there's a marketing component and relationship to IT."

What's the low hanging fruit for technology returns? And what's next? Kunz noted that GlaxoSmithKline got a lot of savings from standardization and consolidation. Outsourcing also saved money.

The future returns will come from using new technologies to enable processes inside the company that will deliver tangible financial benefits, say turning orders to cash faster, said Kunz.

Dzwonczyk said Campbell Soup has tackled enterprise-wide projects by installing SAP, launching RFID projects and new procurement systems. The next frontier is using all the data that comes from those projects.

"The next 36 months will be business intelligence," said Dzwonczyk. The challenge is figuring out how to use that information to retool how people work and enhance customer returns. Dzwonczyk noted the process could take a decade.

Tobaccowalla agreed: "The issue now is we have too much information. If we somehow parse that information out so it's not just another dashboard that's where the next generation will be," he said.

Topics: CXO

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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