Execs Unsure About Tech’s ROI

Finance chiefs acknowledge tech's positive impact, but some are uncertain about the return on investment.
Helen ShawOctober 2, 2006

Most finance chiefs and managing directors at U.S. multinational companies believe their investments in technology have had a positive impact, yet only about one-third are convinced that they are getting an optimum return on their technology dollars.

According to a survey by PricewaterhouseCoopers, 76 percent of senior executives say their technology spending has led to positive results, such as better customer satisfaction, cost reduction, and revenue improvements. Approximately 22 percent of respondents reported very little business impact from technology investments and two percent reported a negative one.

Notably, more service companies than product companies rate the impact of tech spending as positive — 93 percent of service companies versus 69 percent of product companies.

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Yet only 36 percent of respondents are very confident that their technology spending is resulting in an optimum return; 46 percent are somewhat confident and 18 percent are not very confident. Executives estimated that between 9.6 percent and 32 percent of their technology spending is wasted or not very effective. Half of the respondents measure IT effectiveness according to business-value metrics, such as return on investment and ratio of information technology to revenues. Three-quarters of respondents use operational metrics, such as the help desk function.

Half of the companies surveyed state that technology is in their top five priorities within the next year. More service companies, 62 percent, than product businesses, 46 percent, rate tech among their top priorities in the coming year. Among those companies, more executives (45 percent) are confident that they are achieving an optimal return on their tech spending and they report an average tech inefficiency at a relatively low 16.7 percent.

The results indicate an opportunity for the business and technology areas of a firm to connect. “By aligning IT and overall business objectives more closely, CIOs can show how investments are helping the business to succeed,” commented Phil Bloodworth, PwC’s U.S. leader for IT effectiveness, in a statement.

A majority, 69 percent, of companies characterize their technology director as an integral part of the business strategy development process. However, 23 percent report there could be improvement in an integrated process and 14 percent describe the current process as “not very well integrated”.

The survey involved interviews with 107 chief financial officers and managing directors at U.S.-based multinational businesses during the spring of 2006.

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