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ROI: Mad to Measure

Calculating the return on E-business investments isn't easy, but that doesn't stop companies from trying.

Measure not the work/Until the day’s out and the labour done/Then bring your gauges.

So said British poet Elizabeth Barrett Browning — who, it must be noted, did not have an MBA. Companies generally prefer it the other way around: They’d rather not lift a finger, or spend a penny, until a hefty dose of analysis proves that the effort will pay off.

But when it comes to spending on information technology, particularly on those technologies that support ebusiness, a less conforming attitude has prevailed: “Gauges? We don’t need no stinkin’ gauges.” So said a generation of corporate executives who confronted the Information Age with steely eyes, checkbooks at the ready. No wonder Alan Greenspan was moved to note that “the fact that the capital- spending boom is still going strong indicates that businesses continue to find a wide array of potential high-rate-of-return, productivity- enhancing investments. And I see nothing to suggest that these opportunities will peter out anytime soon.”

That was in March of 2000, just as the Nasdaq index began its descent and the phrase “New Economy” became as dated as “Been there, done that.” In the first two quarters of this year business expenditures on equipment and software declined outright (according to Commerce Department figures) versus merely slowing in growth, as many surveys of CFOs and CIOs had seemed to indicate.

Current economic conditions have inspired renewed calls for a tough- love approach to technology investments. Many companies seem eager to move beyond what one consultant has called “the blank-check mentality”; as often as not, however, this gives way to a blank-stare mentality. Calculating technological payback has bedeviled companies for years, particularly when it comes to the sorts of infrastructure investments that are designed to provide a foundation for other, (perhaps) more quantifiable, investments.

Yet forward-thinking companies insist that technology bets can be placed with some rigor. Ebusiness does not require a leap of faith, they argue, so much as a willingness to evaluate return on investment in the broader context that its potential demands. Contributing editors Russ Banham and Hilary Rosenberg spent time with half a dozen companies that have brought some fresh thinking to this critical area. These enterprises compete in far different arenas, from professional sports to transportation to etailing, and they’ve tapped technologies ranging from wireless Web access to Internet advertising to email management. The technologies they’ve deployed, and the efforts they’ve made to assess the value they’ll receive in return, offer lessons for all companies interested in tapping the full potential of ebusiness.

Yellow Corp.

For freight company Yellow Corp. (www.yellowcorp.com), technology investments are a two-way street. The company drives new, lower-cost capabilities out to its customer base, and in return watches additional business roll in. That’s true for ebusiness initiatives as well as more traditional forms of IT spending. “Our cost/benefit matrix is applied to all [IT] projects and has to be measured,” says CFO Don Barger. He says that no projects are exempt from this two-pronged analysis, even an ambitious undertaking such as MyYellow.com, a multifunction portal that has saved the company so much money that the prospect of its winning new business might seem almost beside the point.

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