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Effective IT Report 2010 – This year's report assessed which IT strategies were most likely to deliver return on investment and business value

The Effective IT Report has since its inception compared the relative merits of IT strategies on the basis of their perceived effectiveness among those organisations that have adopted them. The term effectiveness implies both utility – did the technology or management approach achieve what it was supposed to? – and value for money; a technology that served its functional purpose but bankrupted the business could hardly be described as effective.

In the past year, however, the latter concern dominated IT strategy. For the vast majority of IT departments, the job of 2009 was to reduce cost without significantly impairing productivity. And however fast the economy recovers (if indeed at all) the cost-effectiveness of any IT investments will continue to be the highest priority for years to come.

Questions were therefore included in this year’s Effective IT Survey about return on investment (ROI) and business value creation – taken here to mean the contribution to revenue growth and business opportunity creation. In each case, respondents were given the option to respond that it was ‘too soon to tell’.

Of course, whether respondents say that they achieved their expected ROI or business value is a subjective measure; it could be that respondents used inaccurate or incomplete measures of ROI, for example. However, given the sample size of 302, the figures at least reveal the relative performance of the strategies.

The strategies identified as having delivered ROI were quite different from those deemed most effective. This in itself shows that there is much more to the perceived effectiveness of a given strategy than its cost profile, and that the most cost-effective strategies are not always the most useful.

The strategy that successfully delivered the expected ROI for the greatest proportion of adopters was ‘Adopted thin client terminals’, with 87.7% of adopters reporting that it had indeed done so. It is interesting that the number one strategy in terms of ROI is still only number 20 in terms of adoption, suggesting there is some untapped potential to cut the cost of desktop infrastructure through thin client adoption.

This was followed by two open source-related strategies, ‘Deployed Linux in the data centre’ and ‘Deployed open source applications’. This is perhaps to be expected – the absence of licence fees in open source software deployments is arguably their main attraction – but it does contradict an argument put forward by critics of open source: that the reduction in licence cost is counterbalanced by the greater cost of hiring employees with open source experience.

Turning to those strategies for which the greatest proportion of adopters explicitly said that the expected ROI had not been achieved, ‘Outsourcing the IT department’ topped the chart, with just over a quarter (25.1%) reporting so. Even assuming a certain degree of bias against this strategy among IT professionals, it is clear that all is not well with the argument that outsourcing is a simple way to reduce cost. Indeed, the evidence to the contrary is mounting.

The most surprising entrant into this particular chart is ‘Used asset management and helpdesk automation tools’, in sixth place with 17.1% of adopters saying it failed to deliver the expected ROI. This strategy was the third most adopted, and the ninth most effective. This tells us two things: there are a large number of IT support automation projects that have failed to deliver the expected ROI, but also that this failure has often been outweighed by the functional benefits of the strategy.

How to procure IT

The survey asked respondents to describe their organisation’s approach to IT procurement. It was then possible to correlate the various approaches with the rate of success or failure in achieving ROI. Perhaps unsurprisingly, the proportion of IT strategies that successfully delivered ROI was lowest among respondents who said there was “No formal IT procurement process in place” (57%). It was highest among respondents for whom the phrase “Business defines requirements; procurement conducted by IT” best described their approach (74.3%), pipping the group who ticked “All contracts signed are flexible to changing business needs” (70.5%), supposedly a more mature approach.

In terms of the individual IT strategies, the findings for business value creation differed little from the ROI figures. The concept of business value is a nebulous one, and clearly for many respondents it is closely related to ROI.

Meanwhile, the correlation between successful business value creation and the reported attitude that the business has towards IT was largely as expected. Those organisations that agreed with the statement “The contribution of IT is well understood in terms of business value” boasted the greatest proportion of strategies adopted that successfully created business value (74.9%). However, the group that identified with the approach deemed least mature – “IT expenditure is purely a cost that must be minimised” – was not in fact the least likely to deliver business value (66.2% of projects so delivered); that honour was reserved for the group that said “There is some business involvement in cost-justifying new projects” (63.5%) – again a more mature approach, according to observed wisdom.

The finding is perplexing, and only serves to underline the complexity and confusion surrounding the concept of ‘business value creation’.