Firms ‘shooting in the dark’ on IT return on investment – Intel CFO

3 Jun 2009

Intel’s chief financial officer Stacy Smith said today that businesses everywhere need to be capable of demonstrating return on their IT investments, but until now have been “shooting in the dark”.

Smith (pictured) was speaking at the opening of the Intel and Irish-Government-backed Innovation Value Institute (IVI) at the National University of Ireland (NUI), Maynooth, which includes large companies such as Microsoft, The Boston Consulting Group, Microsoft, Chevron, Northrop Grumman, BP and ESB.

“In these challenging times, CEOs and CFOs want IT to improve competitiveness, as well as reduce costs,” Smith told an assembly of academics, civil servants and IT industry leaders.

“Routinely Gartner reports that more than 80pc of IT spending is focused on keeping the business running. A key tactic in response to this challenge is for the CIO to drive down the cost of operations to free up spending for innovation.

“Despite the IT management challenges, IT is one of the most dynamic business resources available today. IT can and does make a real difference, for example through improving employee productivity, business productivity, accelerating the pace of innovation and changing end customers’ experiences.

“No organisation can survive without IT investment today. Yet, for so many years we have been, to an extent, shooting in the dark with our IT investments. Companies have had no way of verifying that their IT dollars are being spent most efficiently, in a way that brings real value to the business.

“As a CFO, the challenge that I have constantly laid down to my colleagues in IT is to demonstrate the business value that IT spend delivers to the organisation. Being a former CIO myself, I have always believed that IT spend should be seen as an asset to the company – not just a cost of doing business.”

Smith said that today’s stark economic outlook makes optimising IT’s value a top priority – that firms need an integrated and standardised framework for systematically improving IT capability and making IT investment decisions strategically from a holistic perspective at the corporate level.

The IT Capability Maturity Framework (IT-CMF), which began as a joint venture between NUI Maynooth and Intel, has been developed and tested by more than 40 companies across Europe and was formally launched to US industry analysts in Silicon Valley in February.

Smith said the IT-CMF provides an end-to-end integrated framework to help the CIO manage the complexities and trade-offs required to continuously evolve IT while delivering demonstrable value.

The IT-CMF addresses issues faced by CIOs such as ‘How to manage IT like a business’, ‘How to manage IT within budget’, ‘Systematically improving IT Capability’, and ‘Managing IT for Business Value’.

“I believe that the IT-CMF enhances the CIO’s role at the boardroom level by helping transform IT’s delivered results into tangible value that is understood and agreed upon by both business and IT. As Intel’s ex-CIO and current CFO, I know how important that is.”

The Irish Government through Enterprise Ireland has invested €1m in the first phase of the IVI’s Consortium Competency Centre, which is comprised of over 40 private and public-sector organisations including Intel, Microsoft, SAP, ENZO, Xilinx, BP, Boston Consulting, ESB, Ernst & Young, Aviva, Compugen, Chevron and Airtricity.

“The rollout of the industry-led Competence Centre Programme is a key commitment in the Government’s Framework for Economic Renewal – Building Ireland’s Smart Economy,” said Taoiseach, Brian Cowen TD.

“Strategic research partnerships between industry and academia can drive innovation, create high-quality employment and deliver a competitive advantage to Irish industry. I welcome the contribution that this initiative will make to the development of a unified and validated approach for managing IT and IT innovation, including in the area of green computing.”

The IVI is the brainchild of Intel’s head of IT innovation Martin Curley, who said the €1m Government grant will act as a catalyst to accelerate the research at the institute.

“It is a unique model,” Curley explained. “Some 80pc of the research is done by working IT executives and business, and 20pc is done by academics. It is done applying a cutting-edge open-innovation approach.

“This will result in research that is higher quality than any one company or any one country can deliver. Our first research results are being delivered from the field in companies such as Chevron and the ESB.

“The aim is to create a global standard to realise business value from IT investments. There is an opportunity here to create an institute of world renown, and move from geographic to virtual communities, combining the world’s leading CIOs in business and the leading academics in the field.

“If we are successful, we will improve the capability, productivity and profitability of IT investments. The biggest problem is there is no way of determining the return on IT investments. Our aim is to develop the principles and practices to help companies measure value.

“We are focused on building roadmaps that give practical advice to CIOs to improve the business capability. The hottest area in IT today, for example, is green computing; we have an active working group making fast progress in this area. Just 2pc of CO2 emissions in the world come from IT, but we can use IT to remove the remaining 98pc.

“This will mean creating a structured model that allows governments and businesses to implement. Axa, for example, was able to reduce global energy consumption by 50pc through its IT strategy,” Curley said.

“The IT-CMF has greatly improved Axa’s efficiencies in setting up new IT systems; overall we have reduced server set-up working time by 96pc,” said Fabrice Lock, director of innovation at Axa Technology.

By John Kennedy

Pictured: Intel’s chief financial officer, Stacy Smith