Achieving Business/IT Alignment Through ROI Analysis

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1 December 2003


New York, NY, USA December 1, 2003

Celent urges IT executives to re-think the role of ROI analysis and realize its value as a tool for ensuring business/IT alignment, rather than consider it a burdensome process required to justify projects.

In the current conservative IT spending environment, "ROI" (return on investment) is king. Demonstrating a positive ROI is the key factor in getting IT projects approved, and C-level executives are devoting significant attention to evaluating potential IT projects. But the requirement to perform an ROI analysis is often perceived as a burden by IT departments, which often lack the business analytical skill to perform effective analyses on their own, leading to frustration and lack of value created by an expensive, time-consuming analysis process. Celent believes that ensuring business/IT alignment is an overlooked value of employing ROI analysis. Putting ROI analysis in the context of business/IT alignment helps change it from a burden imposed by "the bean counters" to a powerful tool to help IT become more effective and more valued.

"Business/IT alignment is a critical success factor for insurers," says Matthew Josefowicz, Manager of Celent痴 Insurance Group and lead author of Celent痴 new report, . "It is also a key C-level concern both inside and outside IT."

As Celent痴 recent CIO/CTO survey demonstrated, ensuring business/IT alignment is the top concern of IT steering committees (or "program offices"). And more and more, C-level business executives are serving on these committees.

"A thorough ROI analysis provides quantified and mutually-agreed-upon success metrics that can be used to manage the project and to evaluate it objectively once it has been completed," Josefowicz adds. "Lack of defined and accepted success metrics is the number one reason that most failed projects are judged to as failures."

The report examines some of the issues around creating ROI analyses within the context of business/IT alignment and discusses how this simple recontextualization of ROI analysis can transform it from a burdensome bureaucratic process to a powerful strategic tool. It reviews the current importance of ROI and business/IT alignment and the environment faced by IT project sponsors. It provides a high-level look at the ROI analysis process, and lays out Celent痴 simplified "Classic Six Questions" methodology. It also provides an overview of other ROI-based project valuation and justification methodologies.

The report also examines the importance of setting success metrics for IT projects, and the role that ROI analysis plays in that process. In addition, it looks at the role that vendors can and should play in ROI analysis. It concludes with a brief summary of key points.

The 22-page report contains 6 figures. A

is available online.

of Celent Communications' Life/Health Insurance and Property/Casualty Insurance research services can download the report electronically by clicking on the icon to the left. Non-members should contact for more information.

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