IT doesn't have to be spend and hope.

• Author: Axson, David A.J.
• Position: Information technology - Information Management

Fearful of falling behind the technology curve, financial executives are struggling to manage their information-technology investments - and to quantify IT's real value.

In what business can you routinely deliver late and over budget, without paying the penalty of going out of business? If you answered "information technology," you're not alone.

IT is expensive and it's costing more each year. IT costs consume 2.2 percent of revenue - a hefty chunk of most companies' after-tax profit margins - according to a new benchmark study piloted by Financial Executives Institute and The Hackett Group.

And 60 percent of large IT projects are delivered late and over budget. Routine activities such as ordering and installing new PCs and delivering basic training on new applications take weeks, not hours.

But instead of objecting to high costs and below-par service, most of IT's captive customers are resigned to it. One symptom of this is that 85 percent of CFOs acknowledge they can't substantiate the real value of their IT investments, based on a 1993 survey by The Hackett Group. Bombarded by bits, bytes and intense user demand for instant Internet access and global e-mail, these CFOs often feel hoodwinked into greenlighting expensive projects.

However, a new perspective is emerging. Forward-thinking CFOs and CIOs know that IT costs are considerable, and they're willing to spend the money - if the value is there. But they also know it's impossible to measure, let alone unlock, the true value of IT if the IT organization itself is poorly managed. They understand a top-notch management process is a prerequisite to getting more value out of the IT equation. And they know it's the only way to provide a dependable framework for measuring - and ultimately enhancing - the value the IT organization can bring to the corporation as a whole.

YOUR TO-DO LIST

To get a handle on the true drivers of IT costs and to focus management on what's critical for success, some 40 companies have joined this benchmark study. The benchmarking effort can help management understand that IT costs are best viewed not as overhead, but as an investment in advancing the business. Also, benchmarking can help IT strengthen its focus on customer service - quality projects, delivered on time and on budget.

As with any complex problem, the first step is to carve it into manageable pieces. There are four key areas to successful leadership of the IT function. By targeting these imperatives, wise financial executives clear away the detritus so they can zero in on what IT needs to accomplish.

CHALLENGE #1:

Control excessive personalization

The typical company in the FEI/THG study maintains six different operating systems and 28 different financial systems per billion dollars of revenue. What's more, most companies are wrestling with numerous different standards (an oxymoron?) on the desktop, for e-mail and other core productivity tools.

For many companies, this lack of standardized tools isn't the result of real business needs, but rather the consequence of the decentralized approach to IT purchasing, which governs how up to 70 percent of IT purchases are made at the typical company. Believing they're fundamentally unique - and consequently the drivers of cost are "inherent" and derive directly from their particular industry, geography or market requirements - business units have built their own huge hardware and software empires over the years. These empires are largely incompatible with each other and are characterized by redundancy and overlap of basic hardware and software choices.

Complexity and fragmentation have a price tag. As Shawn O'Keefe, CFO of DHL Systems (which provides central technology support to the international air express network), notes, "The degree of complexity we have, combined with the limited use of standards in the desktop...