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The Trouble with Emerging Tech ROI

 
 
 
 
 
 
 
 

Investing in emerging technologies is a risky business. And even when a company finds the tools it wants to experiment with, they often deliver different results.

In our upcoming research report on emerging technology, we asked CIOs a slate of questions, including which tools would help improve processes and cut costs.

Rating the highest between the two is unified communications—more than one-third of our 243 respondents said it would boost processes or trim costs. Respondents also said service-oriented architecture delivered almost-equal results in cost cutting (28 percent) and process improvement (26 percent).

Still, others jumped out in one category, but not the other. Take storage virtualization—

it topped the list in cost reduction (42 percent) but lagged in process improvement (18 percent).

We also asked about revenue generation. Of the eight technologies listed, none were cited by at least one in four. SOA and rich Internet applications topped that category.

Late last year we looked at the benefits of becoming an early adopter of emerging technologies. At the time, CIOs told me their biggest problem was producing real ROI estimates, whether in hard dollars or operational improvements.

So the differing returns these technologies render can make the CIO's job of justifying investment even tougher. On the other hand, the fact that emerging technologies can pay back in various forms might be a boon.

Either way, the business of investing in new technologies—and justifying those expenditures—isn't getting easier.

Tell us, IT execs: what's your biggest challenge in justifying emerging technology investments to your bosses?

 
 
 
 

2 Comments for "The Trouble with Emerging Tech ROI"

  • Peter Blaise Monahon May 04, 2008 7:08 am

    The CIO at the last place I worked was so afraid of anything new that they used any excuse to quash emerging technologies, and that means getting rid of the capable people, not just the technologies. Sadly, those in "power" got there not through talent and self-defensible, highly functional work, but by lying and doing the least work possible. The sad part is that their bosses, the Under Secretary and the Commissioners, were unable to know any better themselves, unable to audit and confirm the extent of CIO corruption. The only ones with the skill and talent to know better were the high-tech new hires who brought broad experience from the outside, But, once the CIO found out that they themselves were at risk from savvy in-house IT specialists and IT analysts, the CIO took steps to diminish their access, or fire them, and then increased the subcontracting to vendors whose interests are in keeping their contracts and not identifying the naked and incompetent CIO and others who were not deserving of their positions of responsibility. Of course the vendors also rotated their workers to keep the least costly people on the job so they could eek a profit from the contract, and so, the contracts run for years with little or no real productivity, only endless finger pointing and the hope to get past each annual renewal date only. So, the enemy of emerging technologies is the same old political infighting between incompetent glorified clerks (with paper certifications and degrees, no less!). Good luck. I could not survive them. Why? Because my emerging technology project produced accurate and useful results, was inexpensive, quick to completion, and did not require an enormous long term contract. Result? I got fired, and so, now, the CIO's limping project remains -- dysfunctional, expensive, full of excuses, but with tons of contractors cycling through the payroll.

  • G Stephen DeCherney, MD, MPH May 02, 2008 8:39 pm

    This problem is common in healthcare as well as IT. We used to have lengthly debates of whether to buy experimental technology or another CAT scanner. We solved this problem with a crude cost-utility analysis. Most of these emerging technologies are measured with traditional financial tools of ROI and NPV. They are so biased by made-up assumptions that the discussion usually devolves to a political debate about who has the most clout with CapEx subcommittee of the Exec Committee. There are four traditional economic analyses: cost benefit; cost effectiveness; cost minimalization; and cost utility. The first is familiar. Cost effectiveness evaluates the spend in reverse--for a given effect what will it cost. The third, cost minimalization, defines what is the cheapest way to get to an end. Usually, it is the compromise or budget-constrained approach. Cost utility analysis, by contrast, takes into account various factors and rates them independent of one another. In a healthcare setting, you might use four filters: volume, revenue, risk and profile. Volume is defined by how often the technology will be used by the consumer. Revenue is obvious. Risk asks whether or not you will sued if you do not pursue this new technology. Profile assesses how important it is to your clients that you participate in this emerging area. A series of questions, both quantitative and qualitative are developed for each category. Competing emerging technologies are scored and then ranked by scores. You then review the available budget and determine what you can afford. This simple approach is both practical and takes the political arguments out of the discussion.

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