2001

How do companies deliver 'IT value' when there is little confidence in IT-related business cases? - 14 September 2001

Survey findings from PA Consulting Group

A new survey by PA Consulting Group, a leading management, systems and technology consulting firm, into the value of IT to businesses reveals a pressing need for companies to improve their realization of 'IT value'. While 72% of survey respondents believed CEOs' personal success depended on visible success with IT, the findings across the entire group revealed a great opportunity and need for improvement across all aspects of IT. The key findings of the survey are:

• The overwhelming majority (81%) of senior managers, particularly CEOs, agreed that IT made a significant contribution to their organization's differentiation strategy. Only 40% stated that e-business and the Internet formed a key part of this strategy, showing a practical focus on this channel and the related technologies as merely supporting their businesses' strategy.
  
  
• Members of the management team differed in their views about organizational differentiation and how to measure IT's contribution to corporate value. 27% of all CEOs identified 'service' as their key differentiator, while, in contrast, FDs and IT directors most consistently identified price as their key differentiator (21% and 19% respectively). Across all respondents 'service' was the most frequently cited measure of business benefit of IT, followed closely by cost reduction, profit and business process improvement.

• Achieving a successful transition from strategic intent to the practicalities of implementation is far from clear-cut. Opinions were mixed about where the primary responsibility lies for driving improvements in the business value from IT. A surprisingly high number of respondents cited the IT director, or even the finance director, as bearing the primary responsibility for driving improvements in business value obtained from IT. This highlights an apparent contradiction: while 72% of all respondents agreed that visible success with IT is now far more important for the CEO's personal survival, the CEO was cited in only 38% of cases as having primary responsibility for making it happen in practice. Furthermore, when asked about value justifications for IT investment, only 40% of respondents said they had confidence in their company's IT-related business cases.
  
  
• The vast majority of companies believed they need to make improvements across all IT value-related activities. Respondents were asked to rate the extent to which they agreed with a series of statements relating to how their companies could improve the business value obtained from IT, from prioritisation of the investment portfolio through to harvesting latent benefits. Overall agreement to the statements was overwhelming across all respondents, ranging from 64% to 77%.

'The findings confirm our informal and anecdotal experience with clients. Companies are not as aware as they should be of the trade-offs between different investments in IT. Regardless of whether a project is intended to deliver 'IT innovation' or 'exploit existing assets' we are continually seeing 'non' value-added investment decisions being made. What companies need is a holistic and integrated approach to the exploitation of IT. This survey reveals important issues within organizations regarding their pursuit of the delivery of shareholder value, that every CEO needs to know about.'

'The thought process continues long after the purchase is signed off. Ultimately business leaders and IT must work together around value rather than cost or technologies. Thinking in a simplified framework can often help organizations focus on what's important for them - essentially cutting through the clutter of issues to what is really meaningful and agreeing the actions for improvement. Companies can become lost in analysis with no resulting action - a very dangerous place to be.'

-ends-

For more information, please contact:

Polly Ferguson PA Consulting Group 123 Buckingham Palace Road London SW1W 9SR United Kingdom Tel: +44 20 7333 5653 Fax: +44 20 7312 4612 E-mail: polly.ferguson@paconsulting.com

Notes to editors

1. About the research
   
   So how exactly can a company ensure it has the right focus when it comes to the exploitation of information technology, without being distracted by supplier hype and competing internal demands? In PA's experience, many companies are frustrated by the practicalities and pressures on their IT resources and find that the impetus for delivering business benefits is frequently lost after the financial investment and immediate project deadlines are met.
   
   Our hypothesis was: while IT was playing an increasingly critical role in enabling businesses to differentiate themselves, companies were often not well positioned to focus effectively on maximising the business value of IT. To challenge this thinking, PA commissioned specific research to explore the perspectives of business leaders on the value of IT and to assess the ability and results of their own organizations in really delivering sustainable value from IT.
   
   
2. Survey methodology and demographics
   
   An independent market research company conducted structured telephone interviews with organizations in the private sector. All survey respondents were offered full anonymity on request and were qualified by the researchers as to appropriate positions and responsibilities.
   
   Over 330 respondents were surveyed with their job functions spanning CEOs, finance directors and IT directors
   
   Chief executive officer 85 (25%)
   
   Financial director 82 (24%)
   
   IT director 169 (51%)
   
   
3. PA Consulting Group is a leading management, systems and technology consulting firm, with a unique combination of these capabilities. Established almost 60 years ago, and operating worldwide from over 40 offices in more than 20 countries, PA draws on the knowledge and experience of around 4,000 people, whose skills span the initial generation of ideas and insights all the way through to detailed implementation.
   

   PA builds strategies for the creation and capture of shareholder and customer value, and helps clients accelerate business growth through innovation and the application of technology. PA works with clients to improve performance, mobilize human resources and deliver change effectively, including managing major projects, and designing and implementing enterprise-wide systems and full e-business solutions.

   PA focuses on creating benefits for clients rather than merely proposing them, and this focus is supported by an outstanding implementation track record in every major industry and for governments around the world. PA also develops leading-edge technology both for its clients and within its own portfolio of venture companies in areas ranging from software to wireless technology to life sciences.

   PA distinguishes itself from its competitors through the range and quality of its people, the depth of its industry insight, its development and use of technology, and also its independence and culture of respect, collaboration and flexibility in working with clients.
   

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