GETTING WHATS YOU PAY FOR.

• Author: BORT, JULIE

MEASURING TECH EFFECTIVENESS MORE ART THAN SCIENCE

Before e-business hit center stage, information technology was generally seen as pure overhead. Like pencils, file cabinets and telephones, IT was a tool for creating documents, storing data and enabling communication. It lurked in the back rooms of a business and was said to have done the job if it didn't get in the way or cost much.

Today, IT is a growth driver for many businesses. Online meetings reduce travel costs. Web sites bring in revenues. Contracts can be signed digitally And CEOs have learned that IT isn't just overhead anymore.

But how do you know if you're getting what you pay for? There are two ways to look at the return-on-investment equation for information technology, said David Hashman, chief technology officer of PetroNet Corp. a telecommunications wholesaler in Englewood. "One is the classic view of IT, the notion that IT is all overhead and that you've got to squeeze every penny out of it, reduce it by 10 percent a year," he said. "The other is to tie IT to true business objectives and credit it for contributing to the bottom line. It may cost $1 million to build, but may directly contribute to $10 million in revenue."

The fastest-growing companies nowadays are service-oriented firms that expect to generate 21.8 percent of revenues from e-business in the next 12 months, according to a PriceWaterhouseCoopers survey of 441 CEOs. While product-oriented companies will spend less on IT resources, they will draw just 9.3 percent of revenues from e-business and experience slower growth, the survey says. So a new motto has been born in corporate America. In the old days, IT shouldn't cost much; today it must not cost too much. One word makes for a big difference. And while spending millions on a new computer system is acceptable to -- even encouraged by -- investors and boards of directors, figuring out the return on the investment has also become a more and more important function for both CEOs and their IT departments.

E-business today is about more than Web sites as virtual retail stores. Two-thirds of the CEOs surveyed by Price WaterhouseCoopers say e-business is actually improving employee efficiency. More than half say they use IT to improve customer service, train employees and streamline business processes. And slightly less than half say e-business offers new ways to sell wares, generate additional revenue, bring in new customers, and create new products or services.

IDENTIFYING THE PROBLEM

A traditional complaint against information technology departments is that IT folks perform well technically, but too often fail to respond to the business need that originally spawns a specific project. For instance, an IT...