NEW YORK, Sept. 26, 2006 (PRIMEZONE) -- More than three in four senior executives say their company's technology spending has had a positive business impact in recent years, but there appears to be much room for improvement--particularly in the areas of return on IT spending, reduction of waste and increased effectiveness of the IT function.
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Many cite IT's positive business impact
Seventy-six percent of senior executives say their company's technology spending has had a positive business impact over the past 3 years -- involving revenue enhancement, cost reduction and improved customer satisfaction. This includes 17 percent citing a major positive impact and 59 percent a moderate one. The remainder of those surveyed include 22 percent reporting very little impact, and 2 percent a negative one.
Relatively few are receiving an optimum return on spending
Overall, only 36 percent say they are very confident their business is achieving optimum return on its technology spending. The rest are only somewhat confident (46 percent) or not very confident (18 percent). Confidence was higher among service companies than among product sector businesses -- 42 percent versus 33 percent, respectively.
Waste is an issue
Overall, executives categorized an important share of their company's technology spending, 18.5 percent, as wasted or not very effective. Estimates of waste varied considerably with confidence in getting an optimum return, averaging only 9.6 percent waste for those very confident, 19.3 percent for the somewhat confident and a high of 32.1 percent for those not confident.
"Many top executives say their company has achieved a positive business impact from its IT investments over the past three years," said Phil Bloodworth, PricewaterhouseCoopers' U.S. leader for IT effectiveness. "But among these, fewer than half are very confident their business is getting an optimum return on its technology spending. By aligning IT and overall business objectives more closely, CIOs can show how investments are helping the business to succeed."
Ratings of company's technology function
-- Performance with major new systems.
The majority of senior executives (53 percent) rate the performance of their technology function as "excellent" (8 percent) or "very good" (45 percent) at implementing major new systems projects -- that is, achieving promised benefits with few budget or schedule overruns. Another 37 percent view the performance as "mixed, and needing improvement," and 8 percent as "not very good." Two percent did not report.
Companies citing "excellent" or "very good" performance of their technology function expect to grow faster over the next 12 months, increasing revenue at a 10.3 percent clip, versus 8.4 percent for all others, or 23 percent faster. Also, far more of this group is confident about getting an optimum return from their IT spending (51 percent versus 19 percent); and expect far less waste (13.3 percent versus 23.7 percent).
More leaders in service companies rate their major new systems projects as "excellent" or "very good" (66 percent) than in product companies (49 percent).
-- Fiscal accountability.
A total of 54 percent rates the fiscal accountability of their technology function -- including how well technology spending is visible, properly governed and controlled -- as either "excellent" (11 percent) or "very good" (43 percent). Another 39 percent views the technology function's performance as "mixed: needing improvement," and 7 percent "not very good."
Little difference is found between service and product companies in terms of fiscal accountability.
-- Integration of technology into business strategy.
Sixty-two percent describe the head of technology in their company as integrated into the process of developing its business strategy -- including 11 percent "extremely well integrated," and 51 percent "very well integrated." Another 23 percent say the situation is "mixed: needs improvement," and 14 percent say "not very well integrated."
More service than product sector businesses cite successful integration -- 69 percent versus 59 percent, respectively.
Overall, 72 percent of both service and product companies agree that their planning for purchase of new technology considers all aspects of current corporate business strategy. Only 19 percent disagree, with the remainder (9 percent) uncertain.
-- Technology's fit among corporate priorities.
In half of surveyed companies (51 percent), technology is rated among the top 5 corporate priorities over the next six to 12 months. In an additional 39 percent, technology is included among priorities six through 10, and in the remaining 10 percent it is on a secondary agenda that is periodically checked.
Considerably more service businesses than product companies place technology among their top 5 priorities 62 percent versus 46 percent, respectively.
Where technology is considered among the top five priorities, a much higher proportion of executives (45 percent versus 27 percent) is confident that their business is getting an optimum return from its technology spending, and average waste is a comparatively low 16.7 percent.
-- Importance and effectiveness of the IT function.
The majority of senior executives agree that visibility and transparency of IT spending, IT integration into risk compliance programs, IT governance, and business-driven measurements are "very important" to the effectiveness of their company's IT function. Driving complexity out of IT internal systems is also "very important" to a large minority.
Importance
---------- Effective
Very System in
Important Important Place
--------- --------- -----
Visibility & transparency of IT 86% 54% 53%
spending
IT integrated into risk &
compliance programs 84% 57% 47%
IT governance 81% 52% 54%
Business-driven measurements 79% 54% 42%
Driving complexity out of IT 75% 43% 34%
internal systems
Outsourcing IT 31% 10% 22%
While business-driven measurements are at least "somewhat important" to 79 percent of senior executives, only 42 percent believe they have an effective process in place. Among these, nearly half (49 percent) are primarily measuring IT effectiveness with "business-value metrics" (such as ROI and ratio of IT to revenues), while three-fourths (76 percent) are using "operational metrics" (such as help desk and systems uptime).
Product and service segments are similar in their use of metrics.
"Viewing the technology function from several different angles -- including performance with new systems, fiscal accountability and integration into the company and its priorities -- one could conclude that IT receives good grades, but still has important room for improvement," said Bloodworth. "Effective business-driven measurements are an example of how value could be added in many instances."
PricewaterhouseCoopers' Management Barometer is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.
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