The Case for IT Value: A review of my favorite research
For all of you who are regular readers of my blogs you will know that I am fairly obsessed with the notion of IT Value. This obsession stems from a belief that IT has huge potential to make our lives and organisations substantially better and that it is our job, as an industry, to ensure that this value is delivered. You probably also know my view that in general we fail to deliver this value. The evidence of this is captured extensively in both IT and business literature. Here are some of my “favorites”:
- Mckinsey report that 70 percent of change programmes fail to deliver.
- The Standish Group, in their aptly named Chaos report, state that only 29 percent of software development projects are successful. The remaining 71 percent being troubled or considered an outright failure. To make matters worse, the larger and presumably more important a project the lower the chances that it will succeed, with these so called “grand” projects succeeding less than 10 percent of the time.
- Recently Forbes reported that when it comes to digital transformation, the change programme of our time, 84 percent of these programmes have failed to deliver to date.
- One of the most staggering findings comes from a joint study between McKinsey and Oxford University of mega projects, that is projects with a budget above $10 million. They found that “17 percent of IT projects go so bad that they can threaten the very existence of the company.” Compare the McKinsey / Oxford 17 percent threatening bankruptcy with Standish’s 10 percent success for grand projects and you might conclude that large scale IT projects are more likely to cause you to flirt with bankruptcy than to be successful. It may not be true but the comparison makes you pause and reflect.
It all paints a pretty bleak picture of our ability to deliver value from technology enabled change and I confess to getting a little depressed when I read these reports and write about their findings. It also makes me wonder if perhaps I’m wrong. Maybe IT can’t effectively deliver value. Maybe there is no potential just hyperbole, great marketing and over blown expectations. But then I remind myself that there is a substantial and growing body of research which demonstrates that technology can and does deliver value.
As I reflect on this I realise that while this research is there I and most other commentators don’t write about it so much. I’m not sure why, but perhaps it has something to do with the old cliché that good news doesn’t sell. It’s time to bring some balance to this discussion so here are some of my favourite pieces of research which highlight the good news that IT can and does deliver value when we get it right.
- An Accenture study of European manufacturing and distribution companies found that high performing IT organisations spend 15% – 20% less than their peers, while still being able to invest more in IT enabled innovation, driving more value, higher earnings and growth.
- In their book, IT Savvy, Peter Weill and Jeanne Ross report on MIT’s Centre for Information Systems Research (CISR) where they have found that the most “IT Savvy” firms:
- are 20 percent more profitable.
- the top 18 percent of these firms with the best portfolio management practices have higher profitability
- that are above average on IT savvy and IT spending have margins that are 20 percent higher than industry average vs those lower in both, whose margins are 32 percent lower than industry average.
- “The Digital Advantage,” a joint research effort between Capgemini and MIT’s Centre for Digital Business, found that the top 25 percent most digitally mature organisations had:
- 26 percent higher profitability than the industry average.
- Nine percent higher sales vs assets and effort employed than industry average.
- They also found that the 25 percent least digitally mature had 24 percent lower margin and four percent less sales than the industry average.
- In their report “Maximising Value from Technology Investments” PWC conclude that while there is “no direct correlation between technology investments and profitable growth…” there is “a strong correlation between technology and profitable growth if the investments are focused on targeted capabilities, augmented with the right operating model and implementation skills.
- The essence of the PWC result was also reported by MIT Deloitte in their aptly named report “Strategy, not technology. drives digital transformation”. In the report they say “The trap to avoid, according to Carr, is focusing on technology as an end in itself. Instead, technology should be a means to strategically potent ends.”
So there you have it. As the research shows, the flip side of IT failure is improved organizational performance through the effective use of technology. I hope that as a result of reading this you feel a little better and more optimistic about your chances of success. I know I do from writing it.
If you know of other research, which supports the notion that technology well delivered can and does underpin high performing organizations, I would love to see it. The more examples of quality research supporting the notion that IT can and does deliver value, the better.