Book Excerpt: Making Technology Investments Profitable
Sat, February 15, 2003
CIO — Want to inject some life into an otherwise subdued meeting about IT project selection? Take an emphatic stand for including intangibles as a fundamental element of the decision-making process.
Intangibles are an emotional enigma to IT investment decision-making, and there are many different opinions on what to do about the nonquantifiable benefits put forth in defense of making an IT investment. Some of the typical opinions include, "They should be an integral part of credible IT project selection. They should be used as a tiebreaker only. Ban them entirely?they reflect wishful thinking. They are the only true decision factors and thus should drive everything." Not surprisingly, many decision teams, evaluation committees and business case members end up confused and frustrated concerning the approach they should take with such soft benefits.
Intangible has many meanings, depending on the context of its usage and the intention and viewpoint of the speaker. To a financial analyst, an intangible is an asset for which there are no generally accepted accounting standards that allow it to be quantified. "The premium we paid over the book value of our most recent acquisition is carried as an intangible on our financial statements." In that case, something is intangible by regulatory decree, as determined by government or industry regulatory bodies.
To a football fan, an intangible is that mysterious, unexplainable factor that enables one team to beat another. "Our team has always beaten the opponent whenever we’ve played on the home field. This gives us a real intangible advantage." In sports, intangible is a personal opinion, which may or may not be challenged.
To an IT project selection team member, an intangible is a benefit arising from a proposed investment that is not or cannot be expressed in monetary terms. "Implementing this IT project brings a key intangible benefit?a vastly improved image of our organization with its customers, partners, investors and future employees." Within the context of IT investments, intangibility is a hot, disputed and often confusing issue for the following reasons:
- The definition of intangibility is widely misunderstood and thus often misused.
- There is no central authority to decree a standard definition, so the opinions flow freely, whether they are informed or not.
- Management thought leaders have conflicting positions on intangibles. Upon closer examination, however, those differences are often semantic.
- IT project selection based on a business case analysis could often go one way or another, depending on how intangibles are handled.
