What's technology worth?

• Position: Quantifying the value of technology in business

What CFOs are saying when they're asked...

Many CFOs worry that their companies can't quantify the value of technology. They need more tools to make informed buying decisions and determine the return on technological investments. Are you losing sleep over the same

In virtually all companies, information technology is integral to daily operations. In most companies, financial executives are increasingly called upon to participate in major IT decisions and to quantify the business value of key IT investments. In addressing these issues, senior financial executives have a unique vantage point. Often, they are simultaneously supervisors of the IT function, primary guardians of the corporate assets and, almost certainly, major IT users. One might think that, as a result of their nearly universal involvement with the IT function, financial executives uniformly regard technology as a strategic resource. However, barely half of all respondents to a recent survey by Financial Executives Institute and Computer Sciences Corporation consider IT a core competency; in fact, only 42 percent note that their entity has a strategic IT plan.

These and other survey responses hint at a fundamental disconnect: Financial executives often manage the IT function - and, to a large extent, control its destiny - but in most of their companies, IT has not been positioned to perform as a strategic resource. And, beyond that, while many companies appear to be acknowledging IT's strategic role as a marketplace differentiator, they're not taking the necessary infrastructural steps to make it happen.

Part of the problem may be the difficult dichotomy financial executives face as managers and stakeholders in the information systems function. First, they must keep their companies' financial house in order, which requires a clear understanding of the relationship between investments and return. But often, CFOs can't readily quantify the value of technology. This may explain respondents' number one technology issue - "prioritizing information systems investments" - and their number three issue - "identifying the appropriate level of system investment."

The Big Headaches

Over 60 percent of respondents cite "prioritizing technology investments" as a very critical concern; it appears to plague most companies.

Inherent Year 2000 deadline pressures (fourth among respondents' "very-critical" issues) complicate prioritizing, since virtually every company must develop an organization-wide compliance strategy. In the case of Y2K, doing nothing is a non-alternative, yet organizations must make costly and far-reaching decisions without the benefit of proven approaches to predict and measure IT value. Interestingly, an exceptionally high percentage of companies with more than $1 billion in revenues deem "ensuring Year 2000 systems compliance" and its sister issue...