IT budgeting tool aims to prove it's worth the money

An automated return on investment analysis tool due for launch in September could make it much easier for IT leaders to justify...

An automated return on investment analysis tool due for launch in September could make it much easier for IT leaders to justify the cost of technology investments to top brass.

ValueIT, a Windows-based toolkit from Alinean, is designed to calculate the ROI of proposed projects, determine which projects offer the greatest financial value and benchmark IT spending criteria against industry competitors - such as IT spending per employee and IT spending as a percentage of revenue - from a database of 4,000 US companies across 400-plus industry segments.

A second release of the software in January is expected to offer IT spending benchmark comparisons between 27,000 companies around the world.

One of the software tools, Project ROI, uses templates and building blocks to create a risk-adjusted, discounted cashflow analysis of proposed projects.

The software is designed to assess how IT spending relates to the overall financial performance of a company, using financial calculations such as economic value added, net present value and internal rate of return.

The software also draws upon a list of roughly 150 "intangible benefits" that IT managers can plug into their ROI calculations, such as labour costs per units sold, customer retention rates and inventory turns.

It can also measure how an IT project contributes to the strategic goals of a company, such as increased revenue, improved worker productivity and higher customer satisfaction.

Among the features that impress Grainger are the intangible benefits that can be calculated into an ROI analysis. Dixon Ticonderoga is preparing to install a manufacturing resource planning (MRP) module from its J.D. Edwards & Co. ERP package at its plant in Mexico City, where officials hope to be able to measure how the MRP software impacts employee productivity and drives other efficiency gains, said Grainger.

Although the software carries a high price tag at $20,000 (£12,837), analysts believed the investment would save a lot of time and and allow companies to concentrate on the most valuable projects.

Some IT executives are more sceptical about the tool set. "I'm not sure that senior executives would rely on a piece of software to generate their results," said Priscilla Tate, executive director of the Technology Managers Forum in the US.

A future version of the software, which should be available by next summer, will include tools aimed at helping IT managers to revisit an IT project, for instance, six or 12 months after it has gone into production to determine whether and to what extent the effort met its business and financial objectives.

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