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Align Java Technologies with Business Results
From risk assessment to IT portfolio evaluation, enterprises are taking an objective look at the value delivered by IT
by Peter Varhol

September 13, 2004

Everyone is familiar with the hangovers from overinvestment of technology in the 1990s: the latest exciting developer productivity software sitting on the shelf unused and multimillion dollar projects ready to deploy that were cancelled because the world had changed. When the economy swung down and budgets were tightened, it became painfully clear just how much money was lost to ill-conceived projects and purchases.

Today, enterprises are resolved not to make the same mistake again. Analysts at Gartner call today's IT budgets "realistic," which means that every project has to justify its existence with hard results and a quantifiable return on investment. A 2004 survey of 300 executives at large companies by the consulting firm Accenture found that some 52 percent of executives believe they're getting disappointing return on their IT investment, a statistic that is hardly a sign of an appetite for more uncontrolled spending.

There are few ways to accomplish a favorable return. In theory, at least, it's fairly easy to determine the cost of a particular IT project: multiply the salaries of the participants by the amount of time they spend on the project, and add in the hardware and software expenditures to calculate the total cost of the project.

However, the benefits of that same project can be extraordinarily difficult to measure, in part because not all projects are created equally. In some cases, an application might be necessary for a company to be in business at all. It's difficult to be in business today without a Web site, for example, especially for an e-commerce company. Some applications improve the efficiency of existing business processes, while others create new revenue opportunities. A single measure of the benefit for all of these circumstances would be doing a disservice to all.

Looking Beyond the Numbers
If you look closely, even the cost of the project isn't all that clear. After all, it's unlikely that the enterprise has hired more staff for a single project, and then let them go after the project is completed. You had the staff available and chose that project for them. If the staff wasn't working on that specific project, it is likely working on another one that also has some value to the enterprise. Therefore, the true cost of any software project is more in the lost opportunity for other projects than it is in the salaries and systems.

Yet none of this ambiguity is going to stop IT management from attempting to quantify their costs and value to their organization. There's simply too much at stake. It's not just the cost of IT as a whole, but it's also the price of failure. Projects fail to achieve their objectives, complex software installations fail to work properly, and application downtime hurts sales or production. By these and other failure measures, enterprises can see a direct negative effect on revenues and profits, and often that effect can be huge.