Redefining Tech ROI: Aligning IT and Business Expectations
Organizations recognize that technology investment is critical to innovation and maintaining a competitive edge, even amid economic uncertainties. However, not all investments deliver the same results or meet expectations. Some generate immediate returns, while others may underperform.
To better understand technology investment, AWS collaborated with TechTarget’s Enterprise Strategy Group to survey 1,000 senior IT and line-of-business (LOB) managers across 10 industries globally. The study, described in the full report Evaluating the ROI of Major Tech Investments, aimed to identify high-performing and underperforming technology investments and the reasons behind these outcomes.
One key finding highlighted a significant lack of alignment between IT and business leaders on the value of technology initiatives. While organizations invested heavily in over 10 different technology areas in the past 12 to 24 months, a large perception gap existed between IT and business regarding the returns on those investments. This gap is related to how closely these groups are involved in decision-making and the actual use of the technology. Those more removed from the investment strategy or the technology’s implementation were less likely to report positive returns.
This misalignment is cause for concern because it makes it difficult to prioritize technologies and allocate resources, which can lead to underutilized or ineffective deployments and strained relationships between teams. Bridging this divide is crucial for ensuring that technology investments align with broader business goals and deliver real impact across the organization.
Here are some approaches that can help organizations align decision-makers and maximize technology ROI.
Establish Shared Goals for Value
Creating a clear framework for value realization at the outset can help senior stakeholders align and guide decision-making and future ROI assessments. This involves a collaborative, customer-centric approach that prioritizes customer needs, aligns with business value rather than chasing trends, and provides a clear rationale for investment decisions. The AWS Cloud Value Framework, for example, offers a valuable tool for mapping investments to business outcomes, outlining key value drivers:
- Cost savings (TCO): Focused on cost reduction or avoidance, with KPIs including IT and infrastructure spending.
- Staff productivity: Focused on increasing output, efficiency, and collaboration, with KPIs such as projects delivered and time spent on strategic work.
- Operational resilience: Focused on ensuring business continuity during disruptions, with KPIs tracking security incidents and downtime.
- Business agility: Focused on improving operational flexibility and speed to market, with KPIs measuring time to market and time to actionable insight.
- Sustainability: Focused on minimizing environmental impact, with KPIs measuring carbon reduction.
It’s important to remember that these value drivers are not mutually exclusive. Technology investments can align with multiple drivers and amplify their overall impact.
Set Realistic Expectations
Many organizations set overly optimistic payback periods for technology investments, often expecting returns within 7-12 months. This can lead to rushed implementations and a focus on quick wins, overshadowing long-term benefits. Transformative or complex investments require more time to mature and deliver full value.
To manage expectations, bring IT and LOB stakeholders together early to clarify objectives, define success criteria, and build a shared roadmap. Take a comprehensive approach to measuring ROI, looking beyond quantitative metrics to include qualitative benefits, such as improved customer experiences and customer loyalty.
Build Ongoing Consensus
A frequent issue in investment planning is the lack of communication with other leaders in the organization to get input on current and future needs. Cross-functional collaboration ensures that investments are not only technically sound but also strategically aligned with business goals. IT and business teams need to be involved throughout the investment strategy and planning process, from ideation through implementation and follow-up, to:
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Clarify business priorities
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Jointly set objectives
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Make resourcing decisions
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Develop adoption strategies with input from end-users
To effectively build stakeholder alignment, consider:
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Building a new social contract: Use principles like “disagree and commit” to gather different perspectives and then collectively commit to a plan.
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Empowering rapid decision-making: Act with about 70% of the data in order to enable vigorous debate and accelerate decision-making, leveraging principles like the “bias for action” used at Amazon.
Invest in Your People
Even the most advanced technology will be underutilized if staff lack the skills to utilize it effectively. Employees may resist adopting new technologies, revert to old ways of working, or only use a fraction of a tool’s capabilities without proper training and support. As technology changes rapidly, continuous learning is essential. Consider:
- Partnering with vendors to develop customized training programs and self-paced learning options.
- Engaging leadership teams in learning sessions to make them aware of new tools and technologies.
- Aligning training with business objectives to show how new skills can drive business outcomes.
Implement Continuous Feedback and Adjustments
The business landscape changes constantly, and the initial rationale or application of a given technology may evolve. Maintain an up-to-date picture of how technology is being used and how it meets business needs. Consider:
- Implementing open communication channels to encourage honest feedback about successes and challenges.
- Conducting regular review cycles with managers and leaders to assess value and alignment with business goals.
- Utilizing flexible investment approaches that allow for resource reallocation based on outcomes and changing business needs.
Foster a Culture of Collaborative Innovation
Achieving objectivity and alignment between IT and LOBs is an ongoing process; it also promotes innovation. It requires continuous engagement, communication, and a willingness to adapt strategies based on real-world outcomes. Prioritizing alignment from the outset enables organizations to make more informed investment decisions, leading to better resource allocation, more effective implementations, and, ultimately, stronger business performance.
As technology reshapes the business landscape, organizations that successfully bridge the IT-LOB divide will be best positioned to thrive.
For detailed findings and additional insights, explore the full report on Evaluating the ROI of Major Tech Investments.
About the author:
Chris Hennesey, Enterprise Finance Strategist, AWS. As an Enterprise Finance Strategist with AWS, Chris works with enterprise executives around the globe to share financial management experiences and strategies for how the cloud can help them increase speed and agility, while devoting more of their resources to their customers. Prior to joining AWS, Chris held multiple senior technology finance roles at Capital One. Chris has a BS in Finance and a Master’s in Business Administration.
