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Industry Survey Reveals The Bitter Truth About IT ROI

| by Deborah Hartmann Preuss Follow 0 Followers on Aug 17, 2006. Estimated reading time: 1 minute |

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The Ziff-Davis CIO Insight July 2006 Business Value survey reveals The Bitter Truth About ROI.  In the two years since their last such survey, there has been little improvement in how (or how well) IT is measuring value delivered.  The survey observes:
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.
Findings include:

Only six out of ten companies measure the business value of IT.
At most companies, it's just guesswork.

Do CIOs measure business value often enough?
Only half do an ROI assessment both before and after an IT project is completed

Skepticism about ROI and business value metrics remains high.
Whether they measure in dollars or look at other forms of value, about half of respondents are skeptical about the accuracy of the numbers

IT executives exaggerate IT's impact on productivity.
Most IT executives believe technology's contribution to productivity is much higher than is indicated by economic indicators like the Bureau of Labor Statistics.

How best to measure IT's value?
No one "right way" to measure the value of IT emerges from the study.

Many technologies and IT services are meeting, and even exceeding, their business value expectations.
Security, systems development and web services do the best job of meeting or exceeding business value expectations; outsourcing, CRM and ERP fare worst.

Former ROI surveys are also available on the CIO Insight site:

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ROI is an excuse for not listening to users by j c

Every failed IT effort to get ROI from making something more efficient Ive seen didnt take into account current business practices sufficiently and just said well if I plop this system down I will save money.

For example, having business process engineering folks going to satellite offices and coming back with a suggestion for a "new system" when the computers the users are using are crashing or operating so slowly they can barely do their jobs. Yeah, a new application is JUST what they need.

Or companies using IT apps as a political ploy to unify operating practices between satellite offices and putting the home office stamp of approval on an application while ignoring the needs of the majority of the company.

What does ROI mean if your software effort is doomed to fail and usually does?

Maybe ROI should be second to success. Because ROI has been used to justify so many software failures. Maybe ROIs time is up.

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