Technology

Who’s Screwing Up Financial IT ROI? You Are

Only 24% of the controllers in a recent survey reported seeing a positive return on IT investment.
David RosenbaumAugust 31, 2011

A recent survey on finance technology conducted by the Corporate Executive Board (CEB), an advisory to senior executives, makes for some deeply disturbing reading. Although IT budgets in finance rose by 12% over the past two years, only 24% of the controllers surveyed reported seeing a positive return on IT investment in any area — not sales growth, profit growth, capital efficiency, nor risk mitigation.

And the hits keep coming. According to the CEB’s study of 51 system rollouts, end-user enablement is a significantly better driver of ROI than either business-strategy alignment or the use of sophisticated IT tools. But finance executives rank end-user enablement well behind both in terms of what they focus on.

So, what are these guys thinking?

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“Finance executives are very focused on on-time and on-budget until the go-live date,” says Tim Raiswell, senior research director at the CEB. “As they approach the go-live, they start thinking about change management: sending out some e-mails, putting up posters, finding sophisticated users in the business units.”

In other words, the change-management process — the most important piece in terms of ROI — is an afterthought.

“The thing goes live,” continues Raiswell, “and in the first six months you see people using it as you intended. What’s really going on is they’re trying it out, and then they start reverting to old behaviors. But by then, finance has started deinvesting.”

And once the project sponsor blinks, and the end-users begin engaging in workarounds — reverting, say, to Excel from a new consolidation system — value begins trickling out. Soon, the trickle becomes a torrent. According to the CEB, out of an IT investment of $100 million expected to return $115 million that, in fact, realizes benefits of only $74 million, more than half of that lost $41 million ($22 million) can be attributed to low end-user adoption, more than three times as much as can be laid at the feet of flawed project execution ($6 million).

“There are clear activities that can drive more value from IT investments,” says CEB executive director Michael Griffin. “Spend less time on [IT] sophistication and more on governance and user adoption.”

Unfortunately, less than a fifth of the surveyed controllers agreed with the proposition that they are incentivized to ensure that finance IT meets the business’ needs. Given that, it’s not surprising they would take their eye off the ball when it comes to governance and user adoption.

“A lot of the guys who sign off on investments see IT as a cost of doing business,” says Griffin. The business case for the controller is often, ‘If we don’t update this, we’re going to run into trouble.’ That’s not much of a business case.

“Organizations that get this right say, ‘If we don’t have the best technology, what kind of financial talent are we going to attract?’ That’s a case that looks more like a traditional capital investment in any organic growth opportunity. Are we bringing in the best talent and do we have talent in the pipeline with the right technical knowledge and capabilities? That would incentivize controllers. If financial IT is only a cost of doing businesses, it’s easy to see why nobody is taking on the mantle and making sure it’s going to work.”

And as long as no one does, it won’t, and the finance executive’s slice of the blame pie will be a healthy one.