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2 August 2005

How to check that IT is worthwhile

By Andrew Clifford

IT projects are typically defined to support business change. We need a simple way of checking that the proposed IT changes really will make a positive contribution to the business change.

Without this check, we may well waste time, money and management attention pursuing an IT solution that adds no value. To carry out this check, we need a simple model of what IT is, and how it adds value.

Often we see IT as some magical force for transforming businesses. Although it may support business change, the IT itself is rather mundane. All it does is store, transform and communicate information. Here are some examples:

  • A banking system stores details of customers and their transactions. It calculates balance totals and interest payments. It accepts communications from other banking systems, and communicates the value and transaction history to the account holder.
  • An e-commerce engine stores a product offer and communicates it to potential customers. It accepts communication of orders, calculates totals, taxes and shipping charges. It communicates to payment and fulfilment systems.
  • A word processor remembers the text and formatting of documents. It communicates this to the user on screen or on paper. It calculates the effect of modifications on the document.

IT delivers value in two ways. It directly replace people, because it is faster, cheaper or more accurate - it replaces clerks, sales assistants and typists. It also makes the infeasible possible, such as an e-commerce site communicating with potential customers all over the world.

You can answer the question "do we need the IT?" by considering the following:

  • What business activity is being performed?
  • What information needs to be stored, transformed or communicated?
  • Which of these information requirements can IT do significantly faster, cheaper, or more accurately than people?

This simple analysis should give you a short list of the basic IT capabilities that could potentially add value to a business activity, or support a business change.

You can then cross check this list with the stated requirements of the IT project. If there are requirements that don't match these capabilities, then the requirements can not be met with IT.

I have attempted this analysis a few times. But as soon as I've started talking about the value of IT, the answer has come back "we don't know, we haven't done the cost benefit analysis yet", or "this is a strategic project, we haven't got tangible benefits." In other words, we have embarked on IT projects without ever stopping to check whether IT could potentially add value.

So try this little analysis. It shouldn't take more than a few minutes. You might find that your expectations for IT are quite realistic. But you might find that the case for using IT has simply not been established. And then there is a huge opportunity for saving money by avoiding unnecessary IT.

I'd really like to hear from anyone else who has tried this sort of analysis. Did you find that your IT can deliver real value? Or did you find that the expectations put on IT were quite unrealistic?

Next: Use job descriptions to check business acceptance

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