ROI not that important to UK businesses

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Contrary to popular perception, return on investment is not the be all and end all for finance directors at UK businesses when it comes to determining technology investment decisions.

That’s the startling – and no doubt somewhat controversial – conclusion from a new study of UK decision makers carried out by Unisys, which argues that quality of service, customer experiences, service levels and overall business value are more important. Nontheless cutting costs remains highly important.

Unisys surveyed 400 senior decisions makers with both finance and IT responsibilities in organisations with over 500 people to determine the extent to which technology investment is delivering a return on investment.

The most significant move away from ROI as a vital factor in making a technology investment is seen in the public sector – where the money being spent is of course someone else’s… - but financial services, telcos, utilities, manufacturing and retail all register shifts in opinion.

According to the study results, oganisations which are perceived to be doing well measure their success against service levels, customer experiences and service quality, while the worst performing IT department measure success in relation to direct cost savings.

Unisys suggests that the fact that technology is giving finance directors greater access to more company information about their own organisations and as such they can see more benefits than mere cost-based justification for IT spending.

The study also predicts that in the future most organisations believe that IT investment will be of the greatest value to business through such improved accessibility of information and raised customer service levels.

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By hittjw
05th Aug 2002 18:56

Without ROI how else are you going to measure the success of a technology implementation.

Now vendors might now want you to measure the captial returns you gain directly from their software -- but as a business owner, It is vitally important I know that X software contributed Y to the bottom line.

Return on investment measures can come from improvements in quality-of-service, but are a financial measure of the payback of a certain capital expense. I want to know for every $1 I spend in technology improvements that it contributes to $2 in returns over a certain period.

Another component of ROI that seems to be a miss in various industries it the period of return. I've had software vendors pitch, "you can expect to break even in 18 to 36 months." Well, I recommend to clients that if you can't expect to at least break even in 12 months, then don't implement the software change.

Vendors seem to pad their expectations knowing that in 9 months some new technology will come along and customers will forget all about what they bought in the past. In fact, they can then be sold the "new implementation" before actually earning back the original investment.

I know of companies spending themselves into the ground buying the latest upgrades of every software package they have -- without actually gaining much from the items they already have. This really ticks me off, because I've also seen companies with outdated technology earning 10 times per employee in both profits and revenue.

Actual returns come from more employee training, then the tools you use. Simply put -- know how to use the tools you have first, then enhance only where the greatest improvements will be gained.

Bottom line, ROI is important to all businesses -- If you're not currently measuring it -- then you're going out of business.

Sincerely,

Justin Hitt
Consultant, Author & Speaker
http://www.iunctura.com/

Get your FREE copy of
"14 Ways to Increase Your CRM Return on Investment"
http://iunctura.com/14-crm-roi

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By c.g.m
12th Jul 2002 13:56

It may be that UK businesses have yet to understand how to measure ROI, or it may be that they are approaching the problem from the wrong end of the equation – looking at IT and asking “what ROI can I get from this investment” .

This type of approach gets very messy – heaps of spurious benefits, claims by all parties, but no real programme to deliver – and UK Finance Directors are be right to be sceptical. After all, if we are honest, IT doesn’t actually deliver ROI – changes in business processes do!

Using a more structured technique, looking at corporate strategy, goals and business drivers to identify what benefits are needed and using these to drive the investment programme gives a radically different approach.

In this way benefits are linked not to IT but to the changes in business process and operating practices that will create the return on investment. IT is an enabler and forms part of the costing side of the computation.

UK businesses would do well to adopt this approach in their investment appraisal and business case techniques – then Finance Directors may change their opinion of the ROI calculations produced.

Peter Neville
Director of Business Strategy
Interchange Group
www.interchangegroup.com

Thanks (0)
avatar
By hittjw
05th Aug 2002 18:56

Without ROI how else are you going to measure the success of a technology implementation.

Now vendors might now want you to measure the captial returns you gain directly from their software -- but as a business owner, It is vitally important I know that X software contributed Y to the bottom line.

Return on investment measures can come from improvements in quality-of-service, but are a financial measure of the payback of a certain capital expense. I want to know for every $1 I spend in technology improvements that it contributes to $2 in returns over a certain period.

Another component of ROI that seems to be a miss in various industries it the period of return. I've had software vendors pitch, "you can expect to break even in 18 to 36 months." Well, I recommend to clients that if you can't expect to at least break even in 12 months, then don't implement the software change.

Vendors seem to pad their expectations knowing that in 9 months some new technology will come along and customers will forget all about what they bought in the past. In fact, they can then be sold the "new implementation" before actually earning back the original investment.

I know of companies spending themselves into the ground buying the latest upgrades of every software package they have -- without actually gaining much from the items they already have. This really ticks me off, because I've also seen companies with outdated technology earning 10 times per employee in both profits and revenue.

Actual returns come from more employee training, then the tools you use. Simply put -- know how to use the tools you have first, then enhance only where the greatest improvements will be gained.

Bottom line, ROI is important to all businesses -- If you're not currently measuring it -- then you're going out of business.

Sincerely,

Justin Hitt
Consultant, Author & Speaker
http://www.iunctura.com/

Get your FREE copy of
"14 Ways to Increase Your CRM Return on Investment"
http://iunctura.com/14-crm-roi

Thanks (0)
avatar
By Stuchop
15th Jul 2002 09:25

All I can say is that many UK Finance Directors must be pretty clueless if they think that their technology investments are improving customer service!

Having spoken to my bank, mortgage provider, credit card company and a warranty company for household goods this weekend, I have had poor experinces with all. Either employees have a computer system that is down ("it happens all the time, can you call back" - what and sit in a queue for 20 minutes again?) or "the computer will not let me do that sir"( a reprint of last years certificate of interest). Ultimately I do not want to speak to someone in Halifax or Cambridge that has little or no knowledge of my situation but for an unreliable computer system. I want to speak to someone in my branch who knows what is going on and knows me. Incidently my last 3 months bank statements have been sent to the wrong address - a computer problem. No problem though I can complain to the manager of the local branch care of the customer service centre in cambridge!!!!

Surely "quality of service, customer experiences, service levels and overall business value" are all returns on investment and should be treated as such (all be it not as easily measured as financial returns).Simply calling these customer service centres would give these finance directors a rude awakening!!

Thanks (0)
avatar
12th Jul 2002 14:31

I'm deeply sceptical about the alleged shift in technology investment justification from ROI to impact on service levels, customer experiences and service quality.

Proof: only yesterday I was presenting at a contact centre showcase organised by Getronics. The 20 plus customer service managers said, to a man, that their senior teams did not recognise the impact of service on the bottom line. Hence the continuing pressure to cut service levels, reduce costs and continue to degrade the customer experience.

With apologies to Unisys - senior management is not putting its money where its mouth is, merely paying lip service to service.

Wendy Hewson Hewson Group www.hewson.co.uk

Thanks (0)
avatar
By Stuchop
15th Jul 2002 09:25

All I can say is that many UK Finance Directors must be pretty clueless if they think that their technology investments are improving customer service!

Having spoken to my bank, mortgage provider, credit card company and a warranty company for household goods this weekend, I have had poor experinces with all. Either employees have a computer system that is down ("it happens all the time, can you call back" - what and sit in a queue for 20 minutes again?) or "the computer will not let me do that sir"( a reprint of last years certificate of interest). Ultimately I do not want to speak to someone in Halifax or Cambridge that has little or no knowledge of my situation but for an unreliable computer system. I want to speak to someone in my branch who knows what is going on and knows me. Incidently my last 3 months bank statements have been sent to the wrong address - a computer problem. No problem though I can complain to the manager of the local branch care of the customer service centre in cambridge!!!!

Surely "quality of service, customer experiences, service levels and overall business value" are all returns on investment and should be treated as such (all be it not as easily measured as financial returns).Simply calling these customer service centres would give these finance directors a rude awakening!!

Thanks (0)
avatar
By kmilne
10th Jul 2002 17:10

I would have thought that "quality of service, customer experiences, service levels and overall business value" have always been of the highest priority in CRM investment decisions.

The problem is that they are difficult to measure and hence difficult to compare with the returns achievable through alternative investments.

For this reason, companies have tended to try to convert all these factors into quantifiable cost savings or revenue improvements - not at all easy, hence the many words that have been spoken and written about ROI and CRM.

It seems that what we are to learn from this study is that the more successful organisations know that they need to invest because they recognise the value to the business of improved service levels etc, without necessarily directly attaching a dollar figure to it. This doesn't mean that ROI is dead, rather that the smarter organisations are seeing the return in terms other than cost savings.

There only remains a question of cause and effect: is their success a direct result of ignoring cost savings, or does their greater success give them the means to see value that other organisations cannot see?

Keith Milne
Make It Pay Ltd.

Thanks (0)
avatar
By c.g.m
12th Jul 2002 13:56

It may be that UK businesses have yet to understand how to measure ROI, or it may be that they are approaching the problem from the wrong end of the equation – looking at IT and asking “what ROI can I get from this investment” .

This type of approach gets very messy – heaps of spurious benefits, claims by all parties, but no real programme to deliver – and UK Finance Directors are be right to be sceptical. After all, if we are honest, IT doesn’t actually deliver ROI – changes in business processes do!

Using a more structured technique, looking at corporate strategy, goals and business drivers to identify what benefits are needed and using these to drive the investment programme gives a radically different approach.

In this way benefits are linked not to IT but to the changes in business process and operating practices that will create the return on investment. IT is an enabler and forms part of the costing side of the computation.

UK businesses would do well to adopt this approach in their investment appraisal and business case techniques – then Finance Directors may change their opinion of the ROI calculations produced.

Peter Neville
Director of Business Strategy
Interchange Group
www.interchangegroup.com

Thanks (0)
avatar
12th Jul 2002 14:31

I'm deeply sceptical about the alleged shift in technology investment justification from ROI to impact on service levels, customer experiences and service quality.

Proof: only yesterday I was presenting at a contact centre showcase organised by Getronics. The 20 plus customer service managers said, to a man, that their senior teams did not recognise the impact of service on the bottom line. Hence the continuing pressure to cut service levels, reduce costs and continue to degrade the customer experience.

With apologies to Unisys - senior management is not putting its money where its mouth is, merely paying lip service to service.

Wendy Hewson Hewson Group www.hewson.co.uk

Thanks (0)