Can we help you?
If as a result of asking these questions you believe you need help, then consider how we
have assisted other organisations in applying best practice:
♦
An international bank recognised the need to improve their IT investment appraisal
process but was unsure how to begin. Every manager involved seemed to be
working to their own agenda and was exploiting the confusion. We undertook an
audit of their existing methods and suggested a way forward which strongly
encouraged strategic alignment whilst providing transparency, consistency and
realism for all proposals.
♦
A very large pharmaceutical business had moved forward with applying a benefits
approach but had faltered in their implementation which was bureaucratic and
inflexible. They utilised our approaches and software to enhance their business
case development process. They secured benefits of global contributions to the
proposal on a virtual team basis providing a shared vision whilst saving the
attendant time and costs.
♦
The shared service unit within a major financial services organisation applied our
approaches as a way of better understanding the real needs of its internal
customers and the ways in which these related to the business vision. This
facilitated better prioritisation of demand resulting in the postponement of illconceived proposals.
♦
A very large multi business organisation adopted our approaches so that they could
begin to apply ‘what if’ scenario analysis to their complex portfolio of proposed
projects. Additionally the approach provided a firm foundation for the subsequent
management control of the project applying the criteria contained within the original
business case.
I.T. Investments:
Effectiveness of the Appraisal Process
Professor Chris Edwards and Rob Lambert
Cranfield School of Management
Cranfield, Bedfordshire, MK43 0AL
The Headlines
♦
37% believe that the quality of IT investment appraisal in the UK is either ‘poor’ or ‘very
poor’; this figure was 32% when they considered their own organisation.
♦
43% thought the whole IT investment process was too bureaucratic; 47% thought it
was inconsistently applied and 85% agreed it was often influenced by personal or
political aspirations.
♦
47% believe that the assessment of business benefits was ‘poor’ or even worse.
♦
65% indicate a ‘poor’ or worse assessment of the implications of business change
upon the organisation.
♦
56% of the respondents believe the approval group is ineffective or only slightly
effective.
♦
30% of the respondents believe that IT investment appraisal was regarded as
unimportant by business unit management. Even worse 40% believe that there is little
‘real’ involvement of business managers.
♦
88% believe that their organisations are trying to improve the situation; 49% to a
significant extent.
Every solution is different but all embody and apply best practice
Information Systems at Cranfield School of Management
Cranfield School of Management has for the last decade been a UK leader in gaining value
from IT investments. The Information Systems Group, incorporating the Information Systems
Research Centre, derives the vast majority of its income from business organisations. One
can only surmise, with numbers increasing year on year, that organisations obtain value from
such association.
If, as a result of reading this survey, you would like to better understand how we might help
you in your quest for securing real value from your IT investments ring Professor Chris
Edwards or Rob Lambert (Tel No: 01234 754391). Mention this survey and challenge them
to articulate the tools, the approaches and the associated programmes they can apply to
help you. The solutions they have available go well beyond the conceptual ideas so often
found in academic research. They are equipped to understand your issues, tailor their
approaches to ensure relevance for your organisation and help you embed them into your
ways of working. They would be delighted to present a variety of approaches all with a single
aim of maximising your return from IT investment.
If you recognise any of these in your business read on
Please do contact us!!
Page 8
The I.T. Investment Appraisal Survey 2003
Page
Page11
The I.T. Investment Appraisal Survey 2003
Reflections for your organisation
Birth of the Survey
For a considerable number of years the authors have been intrigued by a number of
questions relating to achieving success from IT investments. Over this period they have
addressed these questions via their personal research, through sponsored research within
the Cranfield Information Systems Research Centre and via company sponsored projects.
Much of this research indicated that the causes of IT failure were often not connected with
the technology, nor, as often reported by others, with the execution of the project. Rather the
issues surrounding the early scoping, development of the business case and subsequent
approval of the project were consistently shown to be critical to success. Even in the
research undertaken by others it is possible to trace the cited symptoms of failure back to a
cause occurring much earlier in the project’s life. Evidence indicates that the negative
experiences reported could plausibly be the result of poor decisions and actions early in the
project.
In summer 2002 the authors decided to undertake a significant survey directly addressing the
causes of IT failures by looking beyond the well-trodden paths of their contempories. They
purposely directed their attention at the early stages in a project’s life cycle, at the
preparation of the business case and the subsequent approval process. Essentially they
wanted to explore the effectiveness of the IT investment appraisal process and whether any
inadequacies revealed could account for subsequent failures. Fundamentally they wanted to
use the insights to shape ‘better practice’.
Many surveys, such as this one, present the results in a generic form and leave you to
interpret them, and more importantly decide if a next step is appropriate. Leaving clients
‘without a direction’ is not our intention and to this end we have listed ten questions, aimed at
your organisation, that build upon the survey results presented earlier.
As you consider these questions maybe you need to ask yourself if the views of others would
provide a different perspective. Our experience is that senior business managers often see a
different picture to IT management, as do the operational level managers responsible for
securing benefits from the investments. Perhaps you could seek the views of others to
provide a broad and balanced perspective.
Consider the following:
♦
Are we really securing the benefits from our IT investments?
♦
Is the business case development, and subsequent approval process, a significant
cause of poor benefit realisation?
♦
Given that many of the causes of inadequacy are outside the IT function, do we
sufficiently involve the business community in such discussions?
♦
Do we really understand best practice in the area of IT investment appraisal?
♦
Do we have an individual clearly tasked with responsibility and resources to
improve this area?
♦
Is our approval group really effective in sorting the ‘wheat from the chaff’?
Overview of the Survey
♦
Is the approval process really approving projects, with the accompanying business
change implications, or just providing ‘ticks in boxes’?
The research questions were grounded in the IT investment appraisal literature and reviewed
on an individual basis with 15 experienced managers. The resulting questionnaire was sent
to approximately seven hundred business and IT leaders selected from past participants of
Cranfield courses, along with members of the Cranfield IT Directors Forum. The majority of
respondents knew Cranfield in some capacity but they may well not have been involved in
any significant manner. The questionnaire was mailed with a covering letter seeking their
views. Copies of the survey are available upon request.
♦
Does the approval process actively release the resources, finance, business people
etc that are required to action the project and secure the benefits?
♦
Given the responses above do we have a real need and aim to do better in this
area?
♦
Indeed, what chance do we have of securing real value from our IT investments in
the next 2 to 3 years?
The purpose was to challenge the accepted wisdom
105 individuals responded each enclosing a completed questionnaire. The responding
businesses were mainly drawn from large organisations with 64% having a spend on IT of
over £500,000. Of the replies 16% represented essentially business persons and 84%
essentially IT focussed managers.
Unsure of the answers to these questions? Contact us for a brief audit!
The survey provided adequate responses for meaningful conclusions
Structure of the Results
The report summarises the respondents’ views on the IT investment appraisal process in
general, then it moves on to analyse the first element of this, namely developing the business
case. The next section reviews the second element - approving the business case.
Page 2
The I.T. Investment Appraisal Survey 2003
Page 7
The I.T. Investment Appraisal Survey 2003
Respondents Views on the IT Investment Appraisal Process
Discussion
Point 1: Acceptable status quo?
So what do all these numbers suggest? As ever, statistics can be interpreted in a variety of
ways: the discussion below represents one view of the world but clearly other interpretations
may be equally valid.
Of those sampled 37% believed that the quality
of IT appraisal in the UK is either ‘poor’ or ‘very
poor’. This figure was 32% when considering
their own organisation.
IT investment appraisal appears to be recognised by the practitioner community as a
significant issue, confirming our initial thoughts. Some might suggest that the issue is actually
more significant than reported as a number of practitioners may still be observing and
believing the ‘symptoms’, namely that the issues lie in the execution.
A separate question indicated that 76% believed
that more than 20% of their IT investments failed
to deliver the initial benefits or more, at the initial
cost or less.
An underlying theme is that management appear not to want to manage IT investments:
some observers suggest that management may prefer to leave it to the technical specialists
whereas others suggest such attitudes disappeared long ago. The traditional story is that the
issues are technical and ‘too complicated’ for a non-technical general manager. Maybe one
has to await the arrival of the next, or even the following generation of managers, to totally
dispel such ideas. However as tomorrow’s managers learn from observing today’s
managers, perhaps the matter will take longer than anticipated.
So the sampled organisations believed they
were failing with regard to IT investment
appraisal and nearly 40% also indicated that the
quality of the process was low. Initial suspicions
were confirmed!
The extent of benefits assessment, or rather the lack of assessment of benefits, is not
surprising: managers continue to argue that quantification is ‘very difficult if not impossible’
and it is better to just go with ‘gut feel’. Defining the benefits required is a critical step as
their ideas may be different from those of other managers involved and may not be well
understood by the IT developers. Attempts to clearly define benefits reveal potentially
differing views and forms a common vision to communicate to the developers. Maybe the
benefits issue is similar to that of young children walking: they have to fall a few times before
they learn, but such learning is slow in coming!
The inadequate consideration of the implications of business change was not unexpected as
many observers suggest this is a significant issue. However the extent is a little surprising!
Maybe this is caused by the lack of involvement of business managers in these processes. A
related issue concerns the non-release of business staff when their involvement becomes
necessary. Again, possibly this occurs because the line managers are barely involved in
developing the original proposal. In fact this non-involvement is probably a contributory
cause of many of the reported points. Perhaps in this demanding economic climate line
managers are just too busy to manage the creation of tomorrow as well as delivering today’s
results. If this is the case we surely will see the continuation in growth of specialist change
agents (e.g. organisational design consultants etc).
Positively, the interest in improvement in this area was unexpected. As ever with limited
volume surveys it would, in retrospect, be interesting to discover how organisations are
undertaking their improvement programmes. This issue will be explored in forthcoming
interview based work.
Generally agree
Slightly agree
Disagree
Strongly disagree
0
The I.T. Investment Appraisal Survey 2003
5
10
15
20
25
30
35
40
There is real involvement of business managers throughout the IT
investment appraisal process
The task of IT investment appraisal process is regarded as important by
business unit senior management
Organisation
Very Good
Good
Reasonable
Poor
Very Poor
0
10
20
30
40
50
30% of the respondents believed that IT investment
appraisal was regarded as unimportant by business
unit management. Even worse 40% believed that
there was little real involvement of business
managers. Given that virtually all IT investment
appraisal involves significant business related
change, is it any wonder IT investments fail!!
Worryingly, given that an earlier survey revealed that
IT investment accounted for 38% of all business
investment, just what does this say about UK
management!
Point 3: Applying the process?
43% thought the whole IT investment process
was too bureaucratic, 47% thought it was
inconsistently applied and a staggering 85%
thought it was often influenced by personal or
political aspirations. This picture suggests that
the IT investment appraisal process is
ineffectively applied and managers just want to
‘get on with their own thing’. When projects are
initiated on this basis is it any wonder that they
subsequently fail to deliver the promised
benefits. The IT investment appraisal process is
just something management feel they need to
do to justify what they want to do anyway!
Strongly agree
Generally agree
Slightly agree
Disagree
Strongly disagree
0
10
20
30
40
50
The process is often influenced by personal/political aspirations
The IT investment appraisal process is consistently applied
There is litte bureaucracy in the IT investment appraisal process
Point 4: Hope exists?
Ability to learn from
the past is high
Trying to improve
Applying the process?
Not at all
Some extent
Totally committed
Page 6
UK
Point 2: Management manage?
Strongly agree
The responses suggest reasons for the poor performance in this area but one wonders if
these are merely ‘rationalisations’ of an underlying cause: namely that business managers
just want to arrange the production of the applications that they feel they require for their
business unit. Perhaps managers resist becoming involved with considering ‘shared’ needs
across business units or having to become concerned with ‘trivia’ like defining benefits and
such. The Nike motto of ‘Just do it’ springs to mind reflecting the attitude of some managers!
How would you describe the quality of IT
investment appraisal in the:
Page 3
Very little
Significantly
Strongly disagree
Slightly agree
Strongly agree
Disagree
Generally agree
88% believed that their organisations are trying to
improve the situation; 49% to a significant extent.
However 35% indicate that their organisations are not
able to learn from the past in this respect, so one is
forced to wonder how this ‘improvement’ will ever
occur.
Maybe the improvement is just a ‘desire’ rather than a
serious attempt. However, there is a clear indication
that organisations need external assistance in this
area as the traditional methods of learning from the
past appear ineffective here! the s
The I.T. Investment Appraisal Survey 2003
Respondents Views on Developing the Business Case
Respondents Views on Approving the Business Case
Point 5: Adequate time and responsibility?
Point 9: Effective appraisal?
Turning to the first element of IT investment
appraisal, namely the development of the business
case, 38% thought the clarity of responsibility was
either ‘poor’ or ‘very poor’ and 36% believed the
time allowed was inadequate. With no clear
responsibility and inadequate time allowed, one
cannot expect a great deal from the business case.
Again this underpins the failure statistics cited
earlier.
The attitudes held by senior management of
‘unimportance’ (Point 2) would begin to explain
some of the reasons for these results.
V e ry G o o d
G ood
R e a s o n a b le
Poor
V e ry P o o r
0
10
20
30
C la rity
40
50
Whatever, the most critical decision point is
undertaken by a group that are perceived to be not
very effective!
Very Poor
Reasonable
Very Good
Poor
Good
Assessment of
all costs
Very Poor
Poor
Reasonable
Good
Very Good
Strongly disagree
Disagree
Slightly agree
Generally agree
Strongly agree
T im e a llo w e d
Point 6: Cost/benefit analysis a mockery?
Assessment of
business benefits
The approval group is
perceived as effective
56% of the respondents believe the approval group is
ineffective or only slightly effective and 29% believed
that the group was not good at establishing businessaligned priorities. Maybe this occurs as the business
case under consideration is so inadequate (see
previous section) or maybe politics just take over
again! (see Point 3).
Point 10: Understand the business case?
Amazingly, 47% believed that the assessment of
business benefits was ‘poor’ or even worse. Is it any real
wonder that businesses complain of not harvesting the
benefits when they are poorly assessed at the very
beginning of the project. Surely every project should
have a clear definition of benefits! Costs are barely
better defined with 37% of respondents reporting a ‘poor’
assessment of project costs.
The combination of these two points indicates that cost/
benefit analysis is a mockery! Indeed 57% indicated that
they have ‘poor’ or worse criteria for assessing project
success or failure. No wonder, given that they were
unsure of the original costs and benefits!
The approval group display a deep
understanding of the business case
Strongly agree
Generally agree
Slightly agree
Disagree
Strongly disagree
0
10
20
30
40
50
36% of those responding believed the approval group
did not understand the business case presented to them.
Maybe this is a reflection of the quality of the business
case (see previous section), or maybe it reflects the
quality of management undertaking this task, or then
again maybe management just do not want to
understand and continue to pursue personal agendas.
Whatever, the fact remains that the most significant
hurdle in the life of the project is based upon an
inadequate degree of understanding!
Point 11: Appropriate discussions?
Point 7: Business implications?
65% indicated a ‘poor’ or worse assessment of the
implications of business change upon the
organisation. If the organisation does not assess the
changes required within its working practices the
project just becomes a means to deliver a chunk of
technology: again suggesting reasons why
organisations do not gain benefits from IT.
The 65% contrasts significantly with the 18%
understanding of IT implications. If management do
not become involved (Point 2) then projects drift into
becoming IT projects and the benefits element
becomes lost.
38% of the respondents believed that tactical
concerns overshadowed strategic issues in the
approval group meetings. One could suggest this
occurs because inappropriate individuals attend such
meetings but the research suggests this is not the
case as 80% suggested the appropriate people were
involved. Possibly approval groups desire to be
involved in minute detail, thereby enabling them to
remain in their comfort zone. If the strategic questions
are too difficult, question the colour of the screen!
Very Good
Good
Reasonable
Poor
Very Poor
0
10
20
30
40
50
The assessment of IT implications
The assessment of business change implications
Very Poor
Reasonable
Very Good
Page 4
Poor
Good
32% of respondents suggested that their organisations
did not adequately consider alternative solution
scenarios. Surely this is short sighted when
consideration of a number of alternative scenarios could
lead to the discovery of one that could provide quick
wins at lower costs. The attitude of ‘let’s not think about
this: just get on with it’ appears to prevail even now.
Many thought such attitudes died many years ago!!!
Disagree
Slightly agree
Gen agree
The approval group
is composed of the
approriate people
Strongly disagree
Slightly agree
Strongly agree
Disagree
Gen agree
Point 12: Turning ideas into benefits?
The degree to which the release of business
resources to undertake the project actually
occurs
Very Good
Good
Reasonable
Poor
Very Poor
0
The I.T. Investment Appraisal Survey 2003
Strongly disagree
Strongly agree
60
Point 8: Consider alternative solutions?
The assessment of alternative possible
solution scenarios
Strategic issues are
discussed and are
not overshadowed
by tactical concerns
Page 5
10
20
30
40
50% indicated that the business resources required to
undertake the project are not actually released when the
project requires them. Maybe again one could suggest
that the correct individuals are not involved in the
approval group but the research indicates this is not the
case. (See Point 11). Possibly all good intentions are
disregarded when this quarter’s profit is in question!
Whatever the cause, it is clear that if the appropriate
business resources are not released the project will
become little more than technology sitting in the wings
waiting to be properly applied.
The I.T. Investment Appraisal Survey 2003