Tuesday's Tip: How To Evaluate Tech Projects For Business Value

May 24, 2010

Today's Evaluation Frameworks Miss The Point

Business leaders seek clarity in understanding which technology solutions drive the most business value. Today's frameworks often focus on a combination of:

Features - ability to execute, current offering, product depth, etc
Direction - vision, strategy, corporate leadership, etc.

Unfortunately, the intersection of features and direction only addresses potential. Clients continue to express how potential alone no longer provides enough justification in vendor selection or understanding the overall adoption strategy.
Next Gen Evaluation Frameworks Must Start With Business Value
Business leaders seek returns on investment. IT leaders strive to reduce cost of delivery. ROI alone may not answer the question as business value needs to be expressed and compared. Business impact remains the goal in building out new frameworks. In addition, the cost of technologies must be factored. As a result, key questions in vendor selection often include:

Will this product provide an ROI?
Where will the organization realize a business impact?
How do various solutions compare in delivering business value?

Organizations Must Balance Business Impact And Cost Of Technology Delivery
Based on conversations with 113 end user clients and vendors, there appears to be a market demand in building out a new framework that compares how (see Figure 1):

Business impact extends across the value chain. Business impact extends into 3 levels of maturity from internal to external (i.e. department, cross enterprise, and business value chain). The greater the penetration of the solution, the greater the business value.
Cost of technology delivery measures against percentage of revenue. Both scaling and return on investment reduce the cost of delivery. Reference data provided via customer references and case studies will provide key data points by industry, size, and geo.

Figure 1. Extent Of Business Impact And Cost Of Technology Delivery Drive Business Value

The Bottom Line - It's Time To Apply The New Model
Evaluation frameworks of the future must begin the process of identifying the key criteria required for end users to be successful with both their business and IT stakeholders. A confluence of disruptive business models, rapid adoption and obsolescence of technologies, and demand for business value data drive the need for this new model. Expect next gen business and technology leaders, research firms, and technology consultants to start today.

Pilot's Log (Behind The Scenes)

On the buy side, I've spoken with over 100 end user customers who remain frustrated with the existing evaluation models. They are ready to embrace models that measure business value. On the sell side, I was meeting with SAP a few weeks back to discuss their new industry strategy, which they launched at SAPPHIRE. When talking about what customers really need, we rekindled this concept of business value and IT value. In fact SAP is aiming their new industry strategy at providing a healthy balance between the two. Conversations with other vendors, hint that this concept will soon catch on. Look for some new evaluation frameworks to emerge from Altimeter this year as we build against these core principles.

Your POV.
Ready to put this model to work in evaluations? Do you think analyst firms should conduct research using this framework? You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.
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