57% of Finance Executives Say their Companies Are ‘Fair’ or ‘Poor’ at Ensuring Big Data and Similar IT Projects Yield Expected Returns

At a time when Big Data and other cutting-edge information technology (IT) is being actively evaluated in boardrooms everywhere, 57% of senior finance executives at large and midsized North American companies say their companies are either “fair” or “poor” at ensuring that such “improve-the-business” IT projects are actually yielding expected financial returns.  And almost none (3%) rate their companies as “excellent.”  That’s according to a new survey of more than 150 senior finance executives by CFO Research in collaboration with AlixPartners, the global business-advisory firm.

The survey also finds that more than two-thirds of financial executives (66%) give their companies a “C” or “D” when it comes to measuring financial returns from discretionary IT projects, such as Big Data ones, designed to improve or add to a company’s business and profits.  (Only 5% gave their companies an “A.”)

Meanwhile, at the other end of the IT spectrum, the survey reveals that “keep-it-running” IT costs – non-discretionary support and maintenance systems – are cannibalizing funds available for business-improving IT. A plurality of respondents (49%) estimates that, over the past two years, their company has maintained approximately a 70-30 ratio of keep-it-running to improve-the-business IT spending, and of that amount, a solid majority – 63% – believes that their company’s spending is weighted too heavily toward keep-it-running IT services, and that a greater share should be directed to improve-the-business IT projects.

The survey also shows that, despite massive IT investments in recent years, companies aren’t getting enough of the kind of information they need to successfully run and grow their businesses.  In fact, no less than 71% of the executives polled say their companies should have access to more robust business information for the money spent on IT.  In addition to desiring more robust information on product profitability (cited by 42%) and customer profitability (41%), there was also strong interest in having better access to information about customer acquisition (33%), revenue (32%), price elasticity (31%), customer attrition (29%) and promotions effectiveness (25%).  

One big reason companies are over-spending on IT or spending on it in the wrong places, reports the survey, has to do with governance and discipline around IT programs.  For example, 72% of respondents said that factors other than a carefully considered business case (e.g., internal politics, personal persistence/willingness to be a “squeaky wheel”) influence the priority and funding of “improve-the-business” IT projects much more often than they should.  Meanwhile, when asked who in their company should have a greater voice in whether to fund such projects, 45% said sponsors from business or functional units and 28% said the finance function.  By contrast, when asked who today is primarily responsible for deciding funding, just 14% said business sponsors and only 7% said the finance function.  

By the same token, when it comes to “keep-it-running” IT spending, 62% of finance executives say that kind of spending is currently either kept at the corporate level (within the IT department) or only partially charged to business units, neither of which is necessarily optimal for controlling such costs.  Moreover, more than two-thirds of those surveyed (66%) say that keep-it-running and improve-the-business IT spending is budgeted together at their companies.

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