Why do businesses initiate IT projects?

The technology field is ever evolving, and we are constantly challenged with keeping up with the latest trends and solutions available. When you read about the newer technologies with all sorts of buzz around them such as Blockchain, AI, IOT and Big Data, it is difficult not to get excited about the possibilities.

However, it is important to remember the primary business decision factors when considering taking on a technology initiative.  Generally, there are only three primary reasons why any business should decide to move forward with an IT project initiative:

Reason #1: Drive Revenue

This tends to be the most obvious reason that a business should leverage technology, but this can manifest itself in many ways. One of the most common options is simply developing an ecommerce platform to leverage the internet to expand the market coverage of a product or service offering.

Another less obvious option is developing a technology solution that disrupts a market. This is typically achieved through building a customer experience that is so compelling that it outweighs the actual product or service offering.  Think of Uber as a great example of this. They do not necessarily get you to your destination any better than a taxi, but the mobile-app-driven customer experience that they developed sure makes it compelling to use. 

The Uber example also highlights another solid revenue-driven reason to initiate technology projects: keeping up with the competition. Think of the taxi services that now offer customer-facing mobile apps to order their cars and arrange pickups. The customer expectation changed due to Uber, and they were forced to react to maintain their revenue streams.

There are many different industry and business-specific technology solutions that companies will undertake, but the most significant underlying driver of these initiatives will always be revenue.

Reason #2: Cost Savings/Efficiency

Efficiency is an interesting term when you think of it from a business perspective. Taking on a technology initiative for the purpose of driving efficiency can be worthwhile, but if it does not indirectly result in cost savings or increased revenue, the benefit is debatable.   

If you are paying three resources to manually enter data on a daily basis and developing an integration solution will eliminate the need for that work, it is fairly easy to quantify the return on your technology investment through workforce reduction. Similarly, technology initiatives that can help drive throughput to better meet customer demand are relatively easy to justify because revenue growth should come along with them.

However, when developing applications or solutions to simply make a job easier or more efficient, it becomes a bit more complicated to understand ROI. If the focus is improving work/life balance and overall employee engagement, that can have intangible benefit, but generally it is a much tougher sell from a financial perspective. Freeing someone up to do higher value work can also be a reasonable justification to take on a technology initiative, particularly with under-utilized employees, but you still may not take on this investment without some downstream financial benefit.

Therefore, efficiency-based initiatives tend to be more difficult to justify funding compared to revenue generators. Without a clear path to ROI, it is a tough sell, and these types of initiatives tend to get pushed year over year without a strong business advocate.

Reason #3: Technical Debt

Technical debt tends to be the bane of most CIO’s, IT Directors, and even small business owners. It is the equivalent to homeowners having to replace their roof every 20 years. You know that you need to do it, you recognize the importance of staying dry, but spending $10k to replace your roof with no tangible gain other than continuing to stay dry never feels good. 

In the IT field this typically manifests itself in the form of a software application, a piece of hardware or an operating system that is past its intended lifespan but still functioning as needed. You can spend the money now and eliminate the risk of catastrophic failure or wait and maybe spend the money on something more compelling like a new website.  Technical debt projects tend to get pushed year over year – “let’s wait one more year to take that on” – because something else is always more important.

Often it takes something catastrophic to drive the decision to move forward on a technical debt project (i.e., your roof is leaking). The problem with waiting too long to deal with technical debt projects is that the hole gets deeper the longer you wait. What may have been a moderate upgrade project can turn into major costly overhauls if the decision is delayed for too long. This can be a very common occurrence in businesses of all sizes, and typically requires a strong IT leadership presence to keep this from happening.

Like many other things in life, procrastinating until next year can come back to bite you hard, but we all continue to do it.

Project Success Factors

Hopefully, these technology initiative decision factors seem obvious to most, but I can assure you that many a technology project has been undertaken for wrong or unclear reasons. Whichever of these decision factors has ultimately influenced you to take on a technology initiative, it is extremely important that the underlying business goals are clearly defined as project success factors. 

Without clearly defined, communicated, and well-understood business goals, technology projects have a high probability to be considered a failure. Even if the delivery team produces the solution flawlessly within budget and on time, the claims of victory will ultimately ring hollow if the project does not have a clear tie to business goals.  I have seen many “successfully” delivered technology solutions ultimately fall by the wayside because they were never properly aligned to a business outcome.

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