Nov 24, 2002 (07:11 PM EST)
Get A Grip On IT Investments
Read the Original Article at InformationWeek
Imperial Irrigation District, a community-owned utility in Southern California, is under constant pressure from the farmers who use its water to keep rates low and run its business wisely. That means Gabe Marcial, the utility's manager for IT, can't make any missteps regarding a disaster-recovery project next year that's expected to cost several million dollars.
Marcial hopes to get a better grip on the outlook for the district's disaster-recovery plans from ValueIT, a software package from startup Alinean LLC that's designed to help managers calculate the expected return on investment of projects and demonstrate the value of IT to the overall business. ValueIT includes a database for benchmarking IT spending against 7,500 companies representing various industries. It also offers cost and return estimates that help executives know if a project is worthwhile. "It helps our board make a decision if you can show how other companies in the market segment are investing and some key performance indicators" around specific investments, Marcial says.
Companies' approaches to estimating ROI before purchasing IT products vary widely. A smattering have spent considerable time and money putting rigorous ROI processes in place, while others rely on a combination of internal calculations, peer reviews, and vendor ROI calculations. Alinean CEO Tom Pisello knows the landscape well, having developed ROI tools while at Interpose, which was later acquired by Gartner. He stayed on at Gartner to grow the company's ROI and total cost of ownership consulting business, then did a stint as CEO of a software startup, Connotate Technologies, which converts legacy data to XML, before starting Alinean.
Alinean's approach is to combine broad trends related to IT spending with project-level details. Those details include hardware and software costs and potential returns, determined by in-dustry-standard numbers and research. They can be customized as well.
"We've tried to create a survival kit to let CIOs flourish through the budget process, which tends to be painful," Pisello says.
Executives are wary of anything characterized as an "ROI tool," because vendors often present their own simple programs as marketing tools to show the value of buying their products. Alinean also faces competition from independent makers of ROI software such as CIOView Corp., as well as analyst and consulting firms that do similar work.
ValueIT, which starts at $10,000 for a small IT organization, is designed to provide executives with an objective framework for comparing projects. Paul Strassmann, CIO of NASA and former CIO at Kraft and Xerox and a board member at Alinean, participated in its development.
On the project side, ValueIT helps determine a broad range of benefits and calculates user adoption curves and other risk factors into the analysis. The company uses proprietary statistical analysis to estimate the dollar amount of IT investments for each company listed in its benchmarking database, Pisello says.
One big advantage is that the tool makes it easier to test vendors' ROI claims. "It's nice to get ballparks from vendors," Grainger says, "but a tool like Alinean's can confirm or deny them."