VideoMeasure 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.
And yet new business is very much on the minds of executives at Overland Park, Kansas—based Yellow, who know that faster cycle times improve the company's capture rate: Make a customer happy on one route or shipment, and you're almost certain to win additional business.
The company launched the portal at the start of last year, intent on providing customers with a single Web site that can satisfy a range of needs, including calculating rates, arranging pickups, tracking shipping status, filling out bills of lading, and communicating with customer service personnel on a range of problems and general queries. The company surveyed its customers beforehand and found them ready and eager to embrace Web interaction. A close look at the sites operated by UPS, FedEx, and others helped Yellow understand what features made the most sense.
Moving customer interaction to the Web has huge implications for the company, because it permits Yellow to offer an expanded range of services far more cheaply than if customers were to rely on phone contact with customer service reps. In fact, Yellow says that the portal has saved it $20 million in this regard. For many companies that might prompt cries of "Case closed!" on the ROI front, but Yellow doesn't stop there. Its calculation also involves the increase in customer capture rate, which correlates to a rise in sales. While the company won't release actual numbers, recent surveys found that customers doing business with Yellow via MyYellow.com are 23 percent more likely to do repeat business than customers who interact in more traditional ways.
Time is money, of course, and as with all of Yellow's technology projects, the portal has to deliver its minimum return in three years. "There's so much change in the technology area that if you can't get that payback, it probably won't get a good return," says Barger. Speed is also at the heart of most of the enhancements that have been made over the past 18 months. An application called Exact Express, for example, allows corporate personnel to give potential customers all pickup and delivery schedules and price options while on the phone or online with them. Sales made via this system were up 40 percent last year and 23 percent in the first quarter.
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