- August 25, 2008
- Posted by: admin
- Category: Blog
The key for every successful business today is not just the project/deal/contract amount but the actual worth that this contract brought to the company. A contract that does not add any future prospects to the company or is least expected to generate any referrals is merely seen as an expensive investment loss.
Therefore, today the percentage of ROI earned as a result of any transaction is actually the measure of how successful or useful certain process/channel/deal is to the company.
The question is how can the development or the technical team assist in boosting this ROI for their company? Well the answer lies in a “practical” combination of the choices that we make. A blend of just right “project management” and “natural process model” can assist any software development company to improve the worth of what they are doing.
A question here arises why to choose only project management and process model when there are so many parameters attached to a software development process. Well, I believe and have experienced that the combination of these can take care of every other parameter in the process. The discussion blow can overview that:
The biggest limitation against ROI generation is that even if the project cost is good enough and profit margin was good but a heavy investment/development cost will take away all the bounties. A good process model should assist the management in keeping the costs as low as possible.
The underlying requirement of every software development model and project management methodology is a successful execution of a project that can in turn generate revenue and ROI for the company and the clients alike. I believe that unless any process you follow, no matter how attractive and modern or short it is, does not generate any profits to your company it is useless.
Your combination of management and methodology should focus on the basic strategy of “lower the cost of project and add value to the product”. Let’s see what steps can assist this goal:
There’s no Best approach, consider several methodologies choose a process model that’s closest to your natural organizational structure and amend them accordingly. Don’t hesitate to mix ‘em up.
Lay out a simple process flow that is practical and flexible. Though very difficult and exacting process definitions are very attractive but what purpose do they service if they can’t be followed by anyone else other than a robot. Nobody expects a project manager to be a psychic; you cannot predict everything thus your strategy should be modified as the scenario requires it to be.
Time Saved=Cost Reduced:
Simplify the efforts required by the technical team to execute the project. Your strategy should simplify the way a team member accomplishes his role. Let’s say for a developer; short, workable and test-driven iterations are more manageable than coding a large module at once. When QA activities are performed on shorter iterations, the results are more thorough and dependable.
Change Is Inevitable
Human nature is prone to mistakes thus changes have to come in; a realistic approach should give space for humanly mistakes and easy change management.
Haven’t we all read so much about the importance of communication in a successful project? But you know as the saying goes “Asking the right questions takes as much skill as giving the right answers.” So design your communication pattern in a way that it is more productive than exhaustive. Avoid discussions and meetings where the team and clients mindlessly fight over petty issues such as the position of a button or banner etc.
Who Am I Doing It For?
Project: Build Titanic
Project Cost: $XXXXXXX
Client Thinks: “Its going to be way better than Titanic..I’m paying so much for it they’ll make it work”.
Project Manager Thinks: “WHAT!!???||| Just build it, the business people have to deal with the client”
Developer Thinks???:”Who rides Titanic these days!!I don’t care what this module will do…I just have to code and get paid”…..”
This example shows why many projects/products fail even though all the right flavors were added to it.
You put in all your efforts in developing a titanic that has apparently no tangible benefit but you keep on developing until the titanic strikes the ice berg!! This happens because you have forgotten to add “value” to your project.
A ”No-Value” product is not only a loss to the client but it’s a loss for you too because you are not going to have any forward agreements of maintenance or patch release. Thus all your research and analysis went in vain.
When analyzing the project share what are the client’s vision, target audience’s expectation and market trends rather than only studying the technical and functional aspects. Keep your strategy customer centric as this approach always focuses on adding and improving the value of the intended system. Your team’s culture should be that meeting the business objectives is more important than meeting the deadlines.
Any project where everyone attached to the product/solution are involved while building it, is always better in functional and non-functional requirements. As Confucius said “Tell me and I’ll forget. Show me and I’ll remember. Involve me and I’ll understand.”
Involve your customer in the process, that helps the team to see the big picture of what they are building, your customers will see the proof of concept of what they’ll sell and you would save time of catching bugs and fixing at the acceptance testing level rather you’ll be able to make the fixes very early in the process. Save Time, save efforts and most of all have a happy customer for your company.
Last but not the least, I believe that its not an individual’s efforts that can produce a successful project or boost a company’s earnings but rather it’s a culture that nurtures team to be productive thus less expensive to the company. As a project manager or consultant it should be your goal to design a strategy that creates a culture of self-management and where every team member understands how much worth rather than cost he can be to a certain project.
Outside of companies whose actual product is technology, technology is just about universally considered as an expense.
In the olden times, management could see the computer roll in and the expensive clerks at their desks with calculators move out and easily see what they were getting for their money. Today, technology is pretty much embedded in every business strategy and plan. The actual cost/benefit is almost impossible to compute because there are no hard lines to begin with and the actual results can only be determined in probabilities.
I suppose a good analogy might be the old-time steel mill owners who computed the expense of expanding their mills without considering that the absentee rate of their workers due to illness from the greater level of effluents on their neighborhoods. Or perhaps in modern terms, the cost in avoidable mistakes that have to be corrected when employees work past the fatigue point. But these are items that can ultimately be measured to a degree and computed. When you’re inventing the future, you don’t know where you’ll truly end up until you’ve got there.
For imponderables such as this, I tend to fall back on the K-Mart/Wal-Mart experience. A recession loomed. One cut expenses. One invested in the future. One now owns the world and the other is now owned. I’m sure that both managements did what they thought was the prudent thing and I’m sure that they had numbers that supported their position.
Adding on to what Tim Holloway wrote a little bit — the reality is that expectations as to what the technology will do are being steadily and continuously raised. Often, technology investments are as much defensive as they are offensive — if a competitor offers a discussion forum on their web site for technical support, you may have no choice but to offer one as well. There’s an ROI calculation based on the reduction in load on your internal technical support staff. This may be complex, but doable with some hard work and reasonable assumptions. On it’s own, that may not deliver the ROI you need to get to your internal hurdle rate.
But, consider that: marketing may determine you have to have the site as a “me, too” capability. Consider that your customers may *expect* the site — they’re not going to view you more positively because you have one, but they’ll be darn miffed if you don’t. That starts getting into “brand value” which is one of the toughest places to measure ROI in a way that everyone believes the results.
I would claim that many technology investments these days fall into this area. AND, that’s where the bulk of a company’s technology investments fall. The trick, then, is to identify true, straight-up, innovative value-add investments…and to get them funded. *Those* investments are relatively small relative to the overall technology budget, but they can provide the more direct ROI.
I’d say that there are two different answers, one for the manufacturing companies and the other for the service companies (or retailers, that are anyway providing a service).
When manufacturing, reducing the activities that do not add value for the customer (e.g. Lean) is foremost, and sometimes technology helps, but there are other variables (the human factor) that cannot be computed exactly and as such technology does not help that much outside of improving predictability.
For service companies, technology is the major help to reduce costs and enhance efficiency and effectiveness. I’m not familiar with the K-Mart/Wal Mart stories therefore I have no idea what “investment in the future” meant for them, but for sure investment in technology (e.g. RFIDs to reduce logistics costs, improved remote diagnostics to reduce response time and increase first time yield) always generate a huge ROI, not only financial but also in terms of customer loyalty.
Wouldn’t it be nice if we could actually answer this question?
All glibness aside, I more or less agree with the prior answers – to a degree. Technology is ubiquitous, the drivers for implementing technology are varied, and the ROI, well, if you have to ask…
I remember when a (technology) company I worked for did an ROI analysis on external email and web access. I was one of the lucky ones that received access. How many tech companies would restrict their developers for web access now? Shut out the power of google to get your job done? How about investing in cell phones or video conferencing equipment? Do we do an ROI for the electrical wiring?
My recommendation is you treat it like any other utility when the technology is a driver, but not a value add. Networking, rack space, cell phones, active sync integration… all are expenses.
If you want to “Technology’ to end up as a driver for business growth/change then treat it that way. Give it a goal. Decide how much that goal is worth to the company – in terms of dollars, customer perception (well, so and so has a forum…), market perception (those people at X sure have it figured out, seen one of their webinars?), or cost savings (if we give our field operators a hand-held, we raise their utilization rate by 10%). Then find a technology that meets that goal for the price you have placed on it.
Gee, that was easy, you say. Ah, see, the problem with expensive technology that fails is not the technology, its the people. Do you give the sponsor enough ownership to make important decisions? Have you talked to your customers about whether they think a forum widget will benefit them? Are you giving important technology decisions proper governance? Are your “requirements” bogged down in mid level managers trying to show off by dictating the terms? Does anyone that is going to use the technology have an opinion???? Are your employees willing/able to adopt the technology? Are you making the perfect the enemy of the good (Do you know how much more expensive those last 10% of custom features are and do you need them)?
No one ever solved a problem with technology without knowing what problem they were trying to solve. And seriously, try to think of how you measure “success” BEFORE you start the project.
As a technologist with a BBA, I have felt the shame of failed projects and the thrill of providing value to our team. I can tell you unequivocally that few if any of your IT personnel enjoys wasting company resources on ridiculous technology, but then seldom does anyone ask “If it were up to you, what technology would you recommend?”.
1. Figure out what you want to accomplish. (um, the opportunity)
2. Choose wisely. (build/buy/partner)
3. Use even more wisely. (test/train/evolve)
And track it wisely – that will make the BI people happy (you know who you are).
A more practical expansion of the quick advice:
Treat the technology like a business partner or prospective employee.
– Define the role, capabilities, and experience you are looking for.
– Define performance goals and metrics.
– Do your due diligence – reference checking, past job performance, etc.
– Interview the candidate – look for fit with organizational culture and existing employees.
– Grow the future employee – don’t give them a huge signing bonus if you are not ready for them to quit before they do their job. Start at a lower salary until they prove themselves ready for promotion, maybe an entry level job that isn’t going to sink the company.
– Evaluate compensation. Try to pay in bonuses or even stock options, marry the performance with pay. (If they are so valuable, why would they balk at earning their income?).
– Consider promoting from within, if possible, however unlikely.
The key to this question is I believe that the dog should wag the tail and not the other way round.
We are living increasingly in a fast paced and increasingly globalised environment where the speed and accuracy of data is critical to intelligent strategic decision making. Technology is advancing at an unprecedented rate before the next generation of processors and mobile communications, 4G and cloud computing rewrite Moore’s law within yet a new chronological framework.
Data for data’s sake in interminable volumes and of questionable quality shows no ROI. It simply burns EBIT, causes confusion and ties up valuable management time deciphering hieroglyphics and trying to get to the real facts. Fast, accurate and relevant data and intelligent predictive modelling presented in a user friendly manner greatly enhances the speed and quality of strategic decision making and creates ROI within sensible parameters according to business size.
In the bone cracking world that you describe which is undoubtedly upon us I believe it is important to remember that any tool is there to make the job easier and produce a better quality and more consistent result. This metric is indeed measurable in terms of performance results, system costs and man hours employed. The tool is therefore not an end in itself; it is there to serve and not to be served.
As in any task or project, the result quality and the ROI is determined by the suitability and capability of the tool employed to execute the task. IT and systems purchasers must use discernment in making the correct tool selection.
My best wishes and thank you for a very relevant and pertinent question.
All Technology changes that are brought in should be done based on careful analysis of market need and demands, a vertical growth and continous research plan is needed in development company,
an extension program to see what is suitable, whats new and meets the business objectives.
Instead of operating same way with a reason ” We always do this way.” bring in new changes when feasible in order to keep growing.
This question is quite similar to–has furniture become an expense rather than an ROI stimulator. IT and furniture are similar in that they are omnipresent and taken for granted and not exciting for the most part. Both continually upgrade in various function and design dimensions. Both are commodities in pricing except for a few designer suppliers.
Most technology is actually a destroyer of ROI rather than neutral or a stimulator for it. The learning and hassle costs of most already applied technology are one weakness but bigger than both of them are the problems caused by generating and shoveling around data that no one has attention for, time for, implementation capability for. If you survey rigorously ALL the data some role gets and generates and ALL the customers who use that data and what value-added-to-final-customers that has, you find that the vast majority of data generated and handled today is complete waste. Traditional boring total quality process and sps methods applied to IT data streams reveals the immensity of waste in current data systems. For example NO executive info system in the world has EVER been used by executives to help any business–keystroke data secretly kept by my personal friends at top corporations proves the ONLY use of these systems is execs looking up, several times a day, the current market value of their personal stock and other investment portfolios. IF you tomorrow eliminate ALL executive info systems in the world NOTHING in any business will be hurt but a lot of executives will make a lot of phone calls all day long to brokers to ascertain their current market worth!!! This is one of hundreds of valid examples.
I agree technology is supposed to facilitate the business growth and improve profitability. The problem is that we have come into a cycle of mega-implementations where the cost to implement reaches into the tens (or perhaps hundreds) of millions and it is difficult to identify an ROI for that level of expenditure.
Wherever there is investment in technology (e.g. ERP solutions) it is important that it adds value to the organisation (and arguably its customers). Automation is certainly a key to efficiency – especially where a computer simplifies complex processes, or reduces the number of human steps involved.
I firmly believe the key way in which IT can contribute to business growth is through he use of Business Intelligence. Maximum benefits can be reaped providing this technology is used to best effect. Organisations do not focus enough of their efforts into making this part of their IT infrastructure successful.
Ultimately the business must understand its processes and set appropriate priorities for each area of spending. Just because we have an old system does not mean that it has to be replaced. More often than not it is the business process that is broken, not the system – but unfortunately the old system is tainted.
I would argue that any large corporate expense should always demonstrate a return on investment in order to be justified. All too often finance people want a return during year 1 – this is not always feasible. That said I have defined successful multi-year ROI’s that have delivered significant return during year 2 (even before all development stages have been delivered).
It seems to me that you need to establish an Enterprise Architecture effort at your company.
EA would be driven by the Business Strategy and Business Architecture (BA). In this case, BA will basically help which aspects of business bring most value (and hence how they can be supported by IT in your case).
The Technology aspect will be managed by IT EA (Applications, Security, Data, Infrastructure and Information).
Based on BA’s recommendations (valued business needs and strategies), a) EA will help your company to manage and evolve your IT decisions (buying, acquiring, evoloving and retiring) and 2) provide a mechanism to make rational decision.
It means you may not need to buy the latest versions hardware or software assets just because they are in the market and sales people are calling you OR its cool to have them OR your competition has them. You can use the EA Process (actually EA team will make those decisions and send them to the Steering Committee) to make rational decisions. Things like ROI and other considerations will be part of those decisions any way.
All the answers so far have a fundamental assumption that technology CAN enhance your business. Not necessarily.
First figure out your business strategy. If your business strategy for this year is to improve your profit margin while supplying to your single customer, dont bother about technology, unless you have a distributed manufacturing and supply chain.
Every thing is contextual. Based on the business strategy, we need to see what processes are the bottlenecks. Then we need to see if this can be resolved through technology. The ROI is established at the process level, not on the technology investment.
Now it becomes easy for us to select a suitable technology which will fit into the budget and will do the job and accomplish the objectives.
This is where we may be able to select VB & MS Access in stead of .Net & SQL Server.
Start with the fundamental understading at the process level and identify improvement opportunities. Then see if automation fits into the context.
Dont even bother about having a web site if you are a captive production unit with 3 years of exclusive supply contract.
I agree with all the previous answers, however, I would like to add the following considerations:
Define a metric to measure success, such as economic profit (also known as economic value added). ROI can be a misleading indicator, especially with with technology platforms.
Utilize a technology that provides measable results. This is the difficult part where careful shopping takes place – locating a technology that brings the high level goals down to the operational floor.
Finally a technology should provide the capability for continuous improvement – any implementation should not be completed or closed – the technology must be a foundation for on going improvement.