SURVEY INDICATES MOST IT ORGANIZATIONS ARE DISCIPLINED: 68% CONDUCT ROI OR TCO ANALYSIS

According to a recent study by Cutter Consortium, 42% of companies are collecting both total cost of ownership (TCO) and return on investment (ROI) data.

Cutter Consortium Senior Consultant Steve Andriole, who analyzed the survey data as part of his research on IT discipline for Cutter's Business-IT Strategies Practice, finds this significant because TCO and ROI data collection lies at the heart of acquisition and management discipline. "Though we'd prefer to see numbers like 80%-90% practicing TCO and ROI discipline, 42% is a healthy -- and we presume growing -- trend. Twenty years ago, TCO and ROI discipline was hard to find in the technology acquisition area."

ROI calculations for new technology investments, one of the cornerstones of IT discipline, is popular with about 17% of companies. Says Andriole, "ROI calculations are tougher to make than TCO calculations because ROI links to business results. TCO calculations can stand alone -- although I'm not implying that they are trivial to calculate.

"The problem most of us have with TCO numbers," Andriole continues, "is the quantification of the soft costs versus hard ones, such as the cost of people support versus procuring hardware, software license fees, and the like."

The irony is that about 9% of respondents conduct TCO analyses without purposeful ROI analysis. Although it's good to collect TCO data, the reason why a company should collect it is to interpret it with reference to business outcomes, measured in some flavor of ROI.

When asked about the 21% that don't calculate ROI or TCO, Andriole answered, "Pretty amazing, actually, especially in light of recent TCO findings that, for example, fix annual cost per user of wireless PDAs at $4,500! There better be a ton of ROI for that TCO. Those that don't calculate cost/benefit data on their technology acquisitions will certainly suboptimize their investments."

-- Cutter Consortium