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Friday, December 19, 2008
Inside Financial Services Technology
ROI offers opportunity among economic crisis
MHT managing editor Rodney Brown on NECN: 22 tech companies give back to community
How is the economic crisis affecting tech companies?
Every day, the front page seems to bring a new chapter in a seemingly endless series of problems threatening the financial industry. This is certainly the greatest economic crisis in generations, perhaps since the Great Depression, and such crises are painful for many reasons, not the least of which is that they demand scrutiny into all organizational spending. However, such scrutiny also presents an opportunity, the opportunity to challenge and change inertia within an organization.
Back to basics – the Discipline of ROI
Times like these require organizations to return to fundamentals, and one of the most fundamental business principles is return on investment. This type of scrutiny is never fun because numbers don’t lie, but ROI presents the opportunity to require economic justification for everything your organization does, particularly those areas where people say, “We’ve always done it that way.” The key isn’t to reject such rationalization outright, but to redirect it back to the numbers, so your team understands the economic impact of its activities.
A good first approach is to ask how your team does things now. How many of your skilled people are involved in any given task? For how many days or weeks are they occupied to achieve the intended result? Simply by beginning to quantify these hard costs, ROI discipline has already had an impact; your people are placing actual value on their time spent. Once you quantify the costs involved in the way you do things now, you can explore alternatives. One of technology’s greatest benefits is its ability to automate away labor-intensive — and thus costly — processes, so your people can move toward more creative and profitable tasks.
Another way to view this is by considering the daily crises that distract your people from productive tasks. How often do they occur? How many of your most valuable resources become involved? How long does it take to achieve resolution, so your team can return to what you hired them to do? One of technology’s great benefits is its ability to help organizations be more proactive. Start by asking, “How can I resolve issues before they become costly for my team, or before they impact my customers and thus my bottom line?” With such scrutiny, you will find ways to unlock hidden value in your organization, value that can often be realized with technology.
Reinvent to Reduce or Redeploy
In judging technologies, one question often asked is, “Can it help me reduce head count?” The better question is, “How can technology help redeploy valuable human resources to more productive endeavors?”
One of our customers — a leading global investment bank — is using our technology to create automation efficiencies in the immediate-term to accelerate their ability to find and resolve software problems from days or weeks to minutes. In the longer run, however, they are considering reinventing their application development life cycle to enable earlier, more proactive testing in development (where finding issues is the cheapest) to make the entire life cycle more efficient. In doing so, those engineers/developers can be redeployed to higher value-added activities.
Near-term efficiencies can become long-run savings in other ways as well. One big trend is the movement toward “green” enterprise. However, organizations are beginning to realize that changes benefiting the environment (and the corporate image) can benefit their bottom line as well.
Another customer — a large European financial services company — wanted to reduce its mainframe CPU use by 30 percent, and ultimately overachieved that target, with a benefit being reduction of their overall carbon footprint. As energy prices spiked earlier this year, however, it found that this reduction was beginning to pay off in greater cost savings. By innovating to become more “green” in the near term, it was also a more profitable enterprise in the long run.
Whatever choices companies make, crises such as those confronting us today will bring pain. Smart companies, however, view such times as an opportunity to rediscover the discipline of ROI and embrace change and innovation. These are companies that will not only become more efficient in the near-term to weather this storm, but will find greater profitability when this crisis has moved from today’s front pages to the pages of history.
Mo Garad is chief financial officer for dynaTrace Software Inc., an application performance management software company based in Austria and Waltham.
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