My spin: Working with technology in a knee jerk reaction is not strategically using technology to grow your business. Sure, you’ll realize some gains from your technology investment. But if you have a technology plan and really know how you will use technology in your business, you’ll find that you get more out of it.
Businesses that align their information technology (IT) strategies with their business strategies are significantly more likely to achieve a high return on IT investment, according to a survey of senior financial officers conducted by Computer Sciences Corporation (NYSE:CSC) and Financial Executives International (FEI). However, 60 percent of survey respondents reported that their corporation has no strategic IT plan.
The survey report, the sixth annual Technology Issues for Financial Executives, identifies the IT trends most critical for chief financial officers (CFOs) and other senior finance executives. In addition to the disconnect between technology and the business plan, this year’s highlights include increased focus on information security and a snapshot of progress regarding enterprise resource planning (ERP) projects.
The survey found that 10 percent of companies achieve a high rate of return on investment for IT projects. Among those companies with a business-aligned IT plan, however, that percentage more than doubles to 24 percent.
Unfortunately, few organizations have such close alignment. The survey shows that only seven percent of respondents have an IT plan fully aligned with their corporate strategy. Roughly 30 percent of respondents reported at least some form of alignment between business and IT strategies, but the majority lacked any such plan.
“Now more than ever, there is a pressing need for executives to link IT spending to business strategy as opposed to previous history or industry averages,” said Ed Mello, chief operating officer of CSC’s Consulting Group. “Companies that are successful in connecting strategy with spend are best positioned to make smart business decisions — whether they involve creating new business models, addressing escalating risk and security issues, or optimizing their extended enterprise.”
Security emerged in the report as a key concern for financial executives. More than half of respondents said that identifying the appropriate level of security for information and electronic applications was very critical to their organization.
When asked to rate their level of concern regarding various facets of information security, nearly all respondents said that growing dependence on — and risk of — computerized and automated systems was a critical or important concern. Roughly two thirds were highly concerned about industry standards and cost of compliance with new legislation such as Sarbanes-Oxley and the Health Insurance Portability and Accountability Act (HIPAA). Half were highly concerned about growing IT security expenditures. Just a third of respondents found terrorism against their companies a critical or important concern.
The respondents also described their experiences regarding their enterprise ERP implementations. ERP projects took longer than expected for more than 40 percent of respondents and cost more than expected for 55 percent of respondents. While ERP implementations are difficult, they also appear to be worth it for many respondents: three out of four of those who completed an ERP implementation rated it a success.
“Only by linking IT and business strategy can companies really assess the ultimate ROI of information technology investments,” said Rebecca Segal, vice president, Worldwide Services and Solutions Integration Strategies Research. “This survey is a wake-up call for financial executives to take action given the potential benefits to be gained.”
The report surveyed 607 respondents, 84 percent of whom are the senior-most financial executive in their organization. Almost all respondents are from the United States and Canada.
“Because the survey encompasses senior financial executives from all major industries and organization sizes, it serves as an important IT benchmark for all CFOs,” said Mello. “The CFO’s perspective on technology is critical in that he or she often oversees the technology organization in addition to their primary responsibility of ensuring that all expenditures are in the best interest of shareholders.”
This year is the first CSC is offering its point of view on key topics associated with the survey results. Commentary regarding IT spending, security and ERP is available, along with a downloadable copy of the report, at http://www.csc.com/solutions/managementconsulting/news/2465.shtml. To view a current csc.com feature story on the report, visit http://www.csc.com/features/2004/4.shtml.
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