Decoding the IT Value Problem: An Executive Guide for Achieving Optimal ROI on Critical IT Investments

CHAPTER 1

The Value of IT

EXECUTIVE SUMMARY

It is important to understand the difference between the perceived value and the real or expected value of IT projects. Small increases in perceived value can lead to huge increases in costs and greatly reduce the odds of a satisfactory outcome.

The 80/20 Law of IT Spending

Many years ago, Sir Arthur C. Clarke famously observed, “Any sufficiently advanced technology is indistinguishable from magic.”

Sir Arthur's comment is, of course, brilliant. It should not, however, be applied to information technology (IT), and it should especially not be applied to decisions about IT spending.

Sure, it might be easier to see IT as some form of magic, but it would also be financially irresponsible. Remember, as a corporate executive, you have a fiduciary responsibility to the corporation and its owners. You have a legal, moral, and ethical responsibility to invest the corporation's money wisely.

So let's just say it out loud: IT isn't magic. IT is often complicated and difficult to understand, but it's not magic. And unlike magic, IT isn't free. In fact, IT can be extremely expensive. IT investments have consequences, and it's crucial to make the right judgments when you're spending the company's money.

That's why it's imperative to understand the 80/20 Law of IT Spending. Let me put it another way: Not understanding the 80/20 law inevitably leads to a fundamental disconnect between IT and the business.

The 80/20 law arises from the difference ...