|
Integration remains a top priority for companies, remaining one of the top three CIO concerns for a number of years. In the early days, the focus on integration was often one of making the IT organization more responsive and efficient, but companies have gradually become more and more aware that integration can help to make the business more agile and competitive. At the same time, buyers have moved from "early adopter" type of companies to the pragmatists who expect to see clear, economically justified business cases. The result is that most companies now consider return on investment (ROI) as an essential part of any investment decision.
Broad Business Value
Integration is a complex subject and a number of different factors need to be taken into account when considering the justification for an integration investment. Firstly, companies have become aware that integration benefits are found in three different aspects of company operations:
- In IT, where it can reduce cost and time-to-market while improving efficiency
- In business operations, where it can enable streamlined operations, better customer service and faster response to competition
- In company brand value, where it can enable modern, consumer-oriented solutions and a higher degree of service quality
When trying to evaluate the benefits brought about by integration, it becomes progressively more difficult to put a figure on the returns as these different areas are considered. Nevertheless, business cases for integration should reflect a combination of tangible returns in hard dollars and more intangible ones which, although difficult to enumerate, can often prove to offer sustainable business value.
It is also necessary to decide the baseline against which the costs and benefits should be measured. Many companies have found integration a necessity in the past, even before the advent of commercially available technologies with which to address the problem. Mechanisms such as point-to-point interfaces, extract/transform/load (ETL) processes, and data replication procedures have become commonplace. Therefore, it is often necessary to compare the business case for purchasing an integration software solution against the do-it-yourself alternative.
Corporate goals may also have a bearing on evaluations. For example, some companies are in a "cost-out" mode, where the only benefits that can be considered in a justification are cost reductions. Finally, companies looking at integration are almost always keen to show not only a return on any investment to be made, but also a return on current assets. These assets might be IT systems that have had billions of dollars of investment to date, skilled and trained staff, or even an established business partner community. In reality however, it is hard to classify any particular company into any of these categories. Instead companies should take individual views on benefits based on their own situations across different spheres of their business activities.
Tangible and Intangible Benefits
Because of the complexity of integration, and the mixture of tangible and intangible benefits, it is rarely possible to build an integration value case that is purely financially based. Instead there are likely to be three parts to the overall evaluation case:
- Actual dollars tied to tangible benefits or costs
- Estimated dollars chosen to represent a more intangible benefit or cost
- Intangible factors that have to be considered as additional weight in any judgment
Real dollar benefits are very valuable in any ROI case, because of the level of certainty attached to them. Obviously, an estimate of the quantifiable dollar gain has to be made initially but it is usually straightforward to measure the actual benefits as a project rolls out to validate the initial estimates. Examples in this first category might be:
- Reduced development work for new projects (design, coding, testing)
- Reduced maintenance costs
- Reduced resource needs
These areas should be closely examined and potential benefits calculated based on such factors as loaded people costs saved or contractor rates. As experience is gained, this methodology can be refined as real benefit data is gathered.
Assigning values to the second group of benefits, for business case purposes is a little trickier. The key is to ensure that the affected departments agree with the assessed benefit value. For example, if improved integration delivers a more just-in-time process for a manufacturing company, one of the benefits will be a reduction in inventory due to the more efficient process.
|
