The Manage IT Newsletter - Getting a hold of IT ROI:

Tips on how to assess and manage for top IT ROI and how to address business skepticism surrounding IT ROI.

Welcome to the October 2004 issue of the "Manage IT Newsletter." This monthly publication is a part mentoring and part coaching tool dedicated to helping IT managers enjoy a richer career experience so they can reach their full potential.

In this issue we will examine how IT managers can prepare themselves to effectively manage for top ROI as well as address they doubts of business leaders who often question IT ROI. My guest in this issue is Ruben Melendez, founder and CEO of Glomark. Glomark is a 12 year-old company that had the same mission from the beginning: to assist IT vendors and buyers assess the economic value and ROI of IT. Glomark started as an ROI-training company, and rapidly realized that value-assessment must go beyond ROI. Equipping IT managers and vendors with practical tools and defining a program for creating an "ROI culture" was as important as the ROI-training itself; therefore Glomark decided to expand and hire and develop a staff of programmers and consultants to accomplish this task. Today Glomark successfully works with many IT vendors and IT organizations in meeting their need to forecast and measure ROI. Glomark is headquartered in Columbus, Ohio, and has a global organization of consultants, experts in assessing the operational and economic value of IT.

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With warmest regards,
Joe Santana,
Co-author Manage IT
www.joesantana.com
Web log: at http://www.joesantana.com/blog.html

P.S. I will be out of the country from October 21st until I return November 8th, so this issue is being published a week early. The next issue will be the year-end review, scheduled for release Thursday, December 2nd 2004
***************************In this Issue ****************************
* Focus Topic: How to get in front of the curve in managing and presenting IT ROI
* IT Management News & Trends:
* Tip Sheet: http://www.joesantana.com/Glomark%20White%20Paper_ROI_The%20New%20IT%20Selling%20and%20Buying%20Process.pdf
* Closing Comments and Announcements
*********************************************************************

--------------------------- Focus Topic -----------------------------
How to get in front of the curve in managing and presenting IT ROI

The topic of IT ROI has a long history, although it has only recently become a true area of focus. The following is an interview with Ruben Melendez, founder and CEO of Glomark, a company that has been assisting IT vendors and buyers assess the economic value of IT for the past 12 years.

JS - How important is understanding ROI to IT buyers and sellers today and why has it become such a hot button?

RM- ROI has been a hot button for a long time, but it was something that was not a "must do" in most corporations. For example, throughout the 90s, IT magazine polls always listed ROI as one of the top priorities for CIOs, but most IT people didn't practice ROI on an ongoing basis. There are several reasons why ROI suddenly moved to a must-do practice in the last couple of years. These include 9/11, the financial scandals in companies like Enron, and other reasons. I will, however, say that the recent economic recession was the main factor. It is hard to find an IT department right now without a PMO (Project/Program management Office), and we find that PMOs have the main goal of ensuring IT project success, including an economic success (ROI).

JS - Many business people, especially CFOs simply do not believe that CIOs or IT vendors can prove IT product or service ROI due to a number of challenges succinctly presented in a recent article published by Darwin Magazine http://www.darwinmag.com/read/090104/problems.html. How do you and your company Glomark help CIOs and IT vendors around this huge philosophical hurdle?

RM - Joe, I disagree with some of the statements made by Ed Gelbstein, the professor who wrote this article. He generalizes about IT value, using a few IT scenarios that do not apply to all IT projects. For example, he says that IT doesn't deliver value by itself and that in my opinion is wrong. In some cases IT doesn't have value by itself, like in IT applications geared to business areas (e.g., sales, marketing, H.R., etc.), but many IT projects and initiatives add value to the existing IT organization and existing IT assets. For example, server consolidation certainly provides benefits in business areas (e.g., agility), but server consolidation also drives considerably savings to the IT department. These include substantial reductions in cost of capital (less servers to upgrade), and in IT services (e.g., less support, less administration, etc.). I can name one example like this in almost each of the issues that Mr. Gelbstien list in his article.

A key issue for IT managers who want to change this type of philosophy is that they generally don't have the skills, the tools, and more importantly the "culture" required to assess and measure ROI. Our company Glomark Corporation, for example, has assisted CIOs and their organizations to train IT managers in ROI-related skills, and in the use of Glomark' Economic Value Creation methodology and our Genius tools. We have identified "best-practices" for implementing a change-management in the IT organization to ensure that people do have a practical and objective way of forecasting, comparing and tracking the ROI of IT projects. Look at Vitro, the $2billion glass manufacturing company, which recently was awarded InformationWeek Mexico's top award for innovation. The CIO gave credit to this success to the fact that their IT managers have a way to assess and measure ROI (using Glomark's EVC methodology, training and tools). See http://www.glassglobal.com/news/details.asp?ID=2492&lang=2

JS - What are some of the most common things that IT leaders omit when putting together an ROI case?

RM - IT managers tend to focus too much on the financial aspects of an ROI study or Business Case, and forget (or don't know) that financial measures only tell you if an investment is good or not. The key to an objective and compelling Business Case preparation is in the identification, mapping and assessment of the "operational impacts" -the link between the technical features of the project and the impact on the IT areas (e.g., assets, application development) and on the business areas (impact on business functions).

Glomark's methodology, while it is not rocket science, provides an effective and proven process and methodology (EVC) that enable you to assess and quantify the benefits of IT initiatives.

JS - How can IT leaders move away from managing IT dollars with a savings goal to managing IT dollars with a value-creation goal?

RM - Savings can be in some instances a value-creation goal, but it depends on the company's financial situation and the strategic objectives in the short to long-term. Right now many companies are focusing again on growth and revenue-oriented benefits are the ones that are linked to value-creation in many organizations. For example, would a company benefit today more from spending $200,000 in an initiative that will reduce 1% their cost of sales, or from an initiative that will allow them to obtain 1% more clients? It all depends on the organization strategic goals, and their current financial situation. Obviously the revenue-oriented benefits tend to be categorized as intangible. They are more difficult to predict. However, even though uncertainty exists relative to intangible benefits, this doesn't mean that they cannot be assessed in economic terms. All intangible benefits can be quantified in economic terms. The issue is that there is more uncertainty, and higher risk of meeting (or not meeting) the expected outcome. Executives generally expect a higher return when there is more uncertainty in the forecast.

JS - What is your parting advice for IT leaders and vendors?

RM - I would say that my advice is that you find out who is assessing ROI successfully and identify best practices. For example, vendors like Siemens Enterprise Networks, have done a good job in equipping their sales and marketing force not just with ROI tools, but also with the right methodology and tools to help clients prepare objective business cases tailored 100% to the clients' environment and situation. Those vendors have more credibility when talking ROI with clients. Application to the specific environment is very important. Unfortunately, they are vendors out there that have generic ROI tools that do not objectively assess ROI for specific companies.

IT buyers should be happy that a vendor wants to talk about ROI. That means the vendor is trying to do more than push boxes or solutions that may not necessarily be in the best interest of the client. Buyers, however, should challenge their vendors and be sure that his/her ROI model is clear and objective, and that they can see and drive all the assumptions and formulas of the Business Case based on their own company environment and needs.

For more valuable ROI advice from Melendez and Glomark, I invite you to go download his 12-page white paper titled "ROI: The New Selling and Buying Process" at http://www.joesantana.com/Glomark%20White%20Paper_ROI_The%20New%20IT%20Selling%20and%20Buying%20Process.pdf
For a look at the various financial dimensions of IT, I invite you to read this month's selections in the News and Trends section.

--------------------------- Tip Sheet --------------------------------
For more valuable ROI advice from Melendez and Glomark, I invite you to go download his 12-page white paper titled "ROI: The New Selling and Buying Process," at
http://www.joesantana.com/Glomark%20White%20Paper_ROI_The%20New%20IT%20Selling%20and%20Buying%20Process.pdf (This takes the place of our monthly tip sheet).

-------------------- IT Management News and Trends -------------------
This month, we offer you four articles that look at the financial side of IT from various key aspects.

Article on how to increase shareholder value through IT investments as well as how to measure impact.
http://www.computerworld.com/managementtopics/management/story/0,10801,96054,00.html?nas=ROI-96054

A piece on why measuring IT ROI can be hard, but us but is necessary work
http://www.campus-technology.com/article.asp?id=9937

An article that provides tips on how to organization your request for IT budget dollars.
http://www.computerworld.com/managementtopics/management/itspending/story/0,10801,95808,00.html?nas=MGT-95808

This piece focuses on how you can maximize your return on your IT budget.
http://www.cio.com/archive/090104/hs_reports.html

----------------- Closing Thoughts and Announcements -----------------
LOOKING FOR A DAILY DOSE OF IT CAREER AND STRATEGY TIPS
Visit Joe's Web Log Monday through Friday (except Holiday's) at http://www.joesantana.com/blog.html

WANT TO KNOW WHAT IT PROS AROUND THE WORLD THINK?
Join to the IT Professional World Wide network at http://itpww1-network.ryze.com and connect with over 1,000 IT professionals across the globe. Many members are using this network to find mentors, discover job opportunities, and find candidates for open positions and much more.

INTERESTED IN LEARNING MORE ABOUT GLOMARK?
Visit Glomark on the web at www.glomark.com or call them at (614) 459-5282

WANT TO HELP YOUR FRIENDS LOOKING FOR ADVICE ON HOW TO FIGHT BURNOUT AND ACHIEVE PEAK PERFORMANCE
Have them visit www.joesantana.com and sign up for the free TIPS DRIVING PEAK PERFORMANCE EMAIL SEMINAR. Delivered over seven days, this program is packed with advice that can immediately be put to use by a rookie or a veteran IT manager. (HR pros will also find it a rich source of ideas they can use to coach IT managers).

NEED HELP WITH EXECUTIVE COACHING, TRAINING, HIRING,
ASSESSMENT Contact EmployeeROI www.EmployeeROI.com/1-212-937-8413

I hope you enjoyed this issue of the IT Managers Newsletter. As always, your feedback on topics that interest you is always appreciated.