The Benefits Realization Approach to IT Investments

Abstract

Information technology is today transforming all aspects of our lives — how we work, shop, play and learn. It is transforming our economic infrastructure — revolutionizing methods of supply, production, distribution, marketing, service, and management. This represents nothing less than a fundamental redesign of the entire supply chains of most industries and indeed a fundamental restructuring of many industries themselves. The potential long-term impact of information technology represents an economic and social transition as fundamental as the shift from rural agriculture to urban industry 200 years ago, during the first Industrial Revolution. Yet today we have a problem — a big problem! Chief information officers (CIOs) are finding themselves increasingly under fire for the perceived lack of value from ever-growing investments in information technology (IT) — investments that in the U.S. now represent close to 50% of companies’ new capital investment and a significant portion of their operating expense. Our investments in technology are not being consistently translated into business value. The link to business results is not clear. It is hard to demonstrate how investments in IT, or in producing information translate into economic value. A 1996 U.S. survey by the Standish Group found 73% of IT projects were cancelled, over budget or late, with 31% being cancelled. Project failures cost an estimated $145 billion. This figure does not include the loss of anticipated business benefits, likely amounting to trillions of dollars. More recent studies confirm that project failures are continuing to occur at a similar rate, and this applies to more recent ERP, e-Commerce, Supply Chain Management and Customer Relationship Management projects as well as more traditional projects.