With tight budgets a fixture for many firms, businesses are seeking a swift return from minimal IT investment. Nick Langley talks to companies that have achieved this goal
A few weeks ago, Computer Weekly looked at the impact of lower IT budgets and found a general determination among businesses to be creative with less money. Those businesses we spoke to were struggling either with uncertainty over future budgets or with the certainty that those budgets were going to remain low for the foreseeable future.
If you do not know what your budget is going to be next year, your investment horizon drops to 12 months and you no longer have the luxury of looking for a long-term return. As a result, organisations are looking for much quicker results from their IT investment and, in some cases, setting out to get business value with no new IT investment at all.
Chris Potts, a director at Dominic Barrow Consulting Services, describes himself as a specialist in value-driven IT management. Working with clients over the past couple of years, he says a trend has become visible. It is all about short-term wins, rather than waiting for IT to deliver "jam tomorrow".
"Rather than starting with something like SAP and wondering where they can get payback, organisations are increasingly asking themselves what value they are looking to achieve over a certain period of time, and how they can use IT to get it," says Potts.
"It is no longer just, 'How good is our IT department at delivering technology?' - although that is obviously still important. It is, 'How good is our organisation at investing in and exploiting IT?'"
But the interesting thing, says Potts, is who is making the decisions. "From reading the press, you would think CIOs were having decision pushed on them. But I have worked with clients where it has been the CIO who has said, 'We need to create more value from IT and create it more quickly. We are going to make sure that any project involving IT delivers a real return within a year, or we are not going to do it.'"
For some organisations - particularly those that spent imprudently on blue-sky investments in the late 1990s - it is a case of going back to basics. One casualty of the bursting of the dotcom bubble, Cable & Wireless, has turned its attention to internal projects that deliver maximum return on investment. Its paper-based expenses reporting system was an obvious candidate.
The application C&W chose was Concur Expense, which had a track record of deployments in multinational companies. Fiona Croft, director of C&W's UK shared services group, says, "The fact that deployment was promised within 90 days was an attractive prospect, as it would mean minimal disruption. In fact, Concur delivered the solution, on both sides of the Atlantic, within 50 days."
The rapid ROI has been derived partly from operational efficiencies, not least that business travellers can now concentrate on their jobs, instead of filling in forms.
Croft says the management reports enable C&W to spot emerging spending trends and go back to frequently-used service providers to negotiate discounts.
At the other end of the scale from automating minor administrative functions are investments that create efficiencies in the core business. Irish insurance provider Vhi Healthcare says it got a three-month return on its investment in employee performance management software, based on a 23% increase in call centre agent productivity.
The technology was introduced at a time when Vhi, which had almost a monopoly in the Irish health insurance market, was facing competition from the likes of Bupa. Vhi fought back with a "differentiation by service" strategy, using the Performix performance management suite to spur on employees.
With Performix, information delivered to employees' desktops shows individuals and teams how well they are performing against the corporate target. Vhi's managers then use the performance information to direct motivational programmes, training and development activities to those who need it.
Vhi now answers 93.6% of calls within 10 seconds, against an industry average of 80% of calls within 20 seconds. The call abandonment rate - the number of people who hang up before their call is answered - is just 0.64% against an industry average of 5%. And, surprisingly perhaps, Vhi says employee retention has gone up and absenteeism down since Performix was introduced.
You would not, however, expect to find quick wins in the mainframe world, where agility is constrained by decades-deep layers of legacy systems and infrastructure. In the financial service sector, moreover, the situation is likely to be complicated by mergers and acquisitions, with huge incompatible systems that have to be kept because they are doing essential work. Rationalising all this baggage traditionally involves long consolidation projects.
But Rudge Bowen, vice-president for sales and services at SEEC, a supplier of web and XML-based consolidation products, insists even the biggest legacy consolidation projects can be broken down into a series of business wins.
Bowen says the traditional IT approach has been, "Let's sort out the infrastructure, then deliver benefit for the business." The ROI might appear over time, but at the end of a two- or three-year project, you could find the destination you have arrived at is no longer the place you need to be.
"People are looking for an ROI within the same budgetary period," Bowen says. "Longer-term projects can be divided into stages, each of which has its own ROI and business justification. They should be able to stop at any stage, and still have the benefits."
George Wloch, an independent programme director, used SEEC's Mosaic Studio when he led a consolidation project at Canada Life. Following several mergers and acquisitions, Canada Life had five different back-office systems, on IBM mainframes running MVS 390, processing similar projects and policies, with all the associated licensing, maintenance and development costs.
"A few years ago, the big temptation would have been to buy a new package at great expense, install and commission it, and move all the data to it," Wloch says.
"But in the present climate, Canada Life considered that one of the existing systems, although not quite as good as a brand new system, was close enough. The benefits were that it did not have a huge capital outlay and began to realise benefits immediately, as it migrated and closed down the old systems. All the lead time was eliminated by using an existing system and each stage in the transition was a win for the business."
Enterprise resource planning is another area where you would not ordinarily expect to find a quick ROI. But even the biggest ERP suppliers have worked hard to provide faster implementations and, as the large corporate market has become saturated, they have begun to target the small to medium-sized businesses that lack the time and money for multi-year projects.
Peak Scientific Instruments, a manufacturer of gas generators, saw its turnover grow from £1.1m in 2000 to £3.2m in 2002. In the face of ever-shorter lead times from customers, the company adopted the Efacs ERP package from RAD Systems and runs it on a Windows small business server.
Ben Cotton, Peak's operations manager, says the firm used to keep 40 to 50 finished products in store, but now has a "just-in-time" process with only one or two items stored. "That was an immediate saving of £400,000 that was no longer tied up in inventory," he says. "Efacs ensures we are driven by orders, pulling product through the system."
Cotton and his colleagues have experience of much more expensive ERP systems. "We would never consider using SAP because the infrastructure and the change in the business it requires is too much of a long-term goal. It is the difference between the system driving how the business operates, and the business driving the system.
"Efacs is basically a SQL database that we can access through reports and so on, ad hoc. I write at least one report a day for somebody. There is no need to call in a specialist, no written code you have to pay an arm and a leg for."
Sometimes, however, technology can drive a business in the most rewarding way. Two years ago, Travelpack, a UK-based provider of specialist holidays to India, moved most of its data entry and accounting functions to offices in Goa. It set up an IP-based virtual private network to handle data transfer.
"The downside was rapidly escalating phone bills," explains Travelpack's joint managing director and IT director Tim Bushell. "Wages may be lower in India, but telecom costs are not."
On the recommendation of IP Integration - the company that set up the VPN, Bushell looked into voice over IP, which provides voice calls at local internet access rates.
Travelpack adopted eight-port, Linux-based Bosanova IP telephony gateways from BOSCom to provide eight VoIP lines between Harrow and Goa, and internet links from its three other Indian offices. The cost was less than £5,000. "As we already had 1mbps leased-line links to our UK and Indian ISPs, our voice call tariff costs were nil," says Bushell.
Voice quality is good, even at peak times, although there is a fall-back to the public switched telephone network should quality drop. Travelpack decided it was good enough for external use too, and took advantage of the time difference to route early-morning customer calls from the UK to staff in India.
"Without IP telephony, our monthly telephone bills between the UK and India would top £100,000 a month," Bushell says. "We built this as a way of communicating with 15 or 20 internal staff in Goa. There was not a great deal of pressure for it to work, and it did not involve much expenditure. So if it did not work, we could have just chalked it up to experience. But it performed way beyond what we expected.
"We have just bought a new building in India, capable of taking up to 1,000 staff, primarily because we can see the cost savings in taking calls over there.
"It is almost as if the technology has opened up the business, which is a bit bizarre."
Somewhere, deep down, perhaps this is what every IT director is hoping for: a miraculous business transformation from simple, low-cost technology. The difference today is that we no longer expect it.
The quick fix - five ways to get ROI in under a year
Invest in low-cost voice over IP gateways, and get national and international calls for the price of a connection to your ISP
Consolidate by migrating to the best of your legacy systems, instead of buying a new one. Every old system you eliminate will bring a quick win in licence and maintenance costs
Break large projects up into a series of stages, each with a business goal and ROI within one budgetary period
Invest in management reporting or analytical applications that highlight spending trends, enabling you to claim earlier discounts from regular suppliers
Automate any remaining manual administrative processes.
Can't pay? Won't pay!
Chris Potts, director of consultancy Dominic Barrow, says some of his clients are looking into exploiting the IT they already have - and have spent a lot of money on - with little or no new investment.
"Among the other advantages, there is no time lag," he says. "You can shorten the whole cycle by removing the lead time."
Others are deferring investments, in the expectation that prices will fall. "Directors are fully aware of how the IT industry works these days, and whether products and services are over-priced," says Potts.
"Although hardware is getting cheaper, the price of software and the services to make it work still seem pretty buoyant. Before they go spending money on software, they think there is room for efficiencies in the market, to bring down the prices of things that still look pretty expensive for what they are."