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2004 ROI predictions

Which investments will consume IT budgets in 2004? How will CIOs manage their IT spending? And how important will ROI SLAs be this year? ROI expert Tom Pisello addresses these questions and more in his 2004 ROI predictions.

2004 IT "taxes" will consume expanded IT budgets: While IT budgets are expected to rise an estimated 5% to8%, much of the increase will go towards three initiatives that will consume much of the increase:

  1. Sarbanes-Oxley compliance: The June 2004 deadline is fast approaching, and many organizations still face significant work. Investment in these projects was grossly underestimated in 2003, leaving a large unexpected burden for 2004.
  2. Enterprise security: Because of successful cyber attacks in 2003, funding will substantially increase to bolster security tools, policies and procedures. Many remedies will fix platform-inherent issues, but provide little 'real value' to organizations' market share or business.
  3. PC upgrades: Many organizations invested in PC and other infrastructure upgrades to prepare for Y2K, and those four-year-old investments are showing signs of old age. This will force many organizations to dig deep and perform wholesale infrastructure upgrades. There is a solid ROI for these upgrades, particularly if organizations take advantage of new mobile/wireless solutions.

Growth of "rogue" or "shadow" IT budgets: To circumvent tight IT budgets, business leaders needing technology have been gaining

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stealth approval for spending by wrapping IT initiatives within other business investments. These shadow budgets have risen from 10% to 20% of IT spending in most organizations over the past three years, and will continue to rise in 2004 unless C-level executives and CIOs implement IT governance plans.

Increased use of the ROI Service Level Agreement (SLA): With the majority of new technology investments over-budget, over-schedule or failing to deliver the expected ROI, IT purchasers will offload some of the inherent project risk to vendors. One way to accomplish this is through an ROI service level agreement (SLA). Under this model, customers and vendors partner to ensure ROI goals are realized, and tie some of the project's financial compensation to the achievement of key benefits within established deadlines. The ROI SLA requires that vendors and CIOs perform pre-project benchmarking and post-implementation auditing to ensure fair and credible evaluation of project success or failure.

Tom Pisello is the president and CEO of Orlando-based Alinean, the ROI consultancy helping CIOs, consultants and vendors assess and articulate the business value of IT investments. He can be reached at tpisello@alinean.com.

This was first published in January 2004

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