By calculating ROI for their new initiatives and then looking back once a project is completed to see if they hit their numbers, Intel's IT department figures it delivered a whopping $1.7 billion (yes, with a 'B') in business value to the company.
Although they won't hit this number in 2006, they also reduced per-employee IT costs by eight percent by keeping costs flat while the number of employees went up, said Martin Menard, director of Intel's High Performance Computing group. Although not officially in his title, Menard is a group CIO who controls $350 million of Intel's $1.1 billion IT budget and is a direct-report to Intel's CIO.
"It's the return on the investment made for new capabilities delivered in the course of a year," said Menard. "So anything to keep the business running (KTBR), we wouldn't track as a business value number."
What does get tracked is project-specific but Menard works closely with his project teams and two types of professionals not generally associated with IT departmentshuman-factors engineers and ethnographers (people who study people)to come up with measurable ROI metrics. They then use these number to go back to check up on their pre-implementation assumptions to see if they were right.
"It's all based on financial modeling for value and return on invested capital," said Menard. "The benefit for a company is it allows you to have a common language to make decisions."
This is basically a form a benchmarking and nothing new, yet Menard is surprised by how few companies (even other groups inside of Intel) don't do this.
"IT shops are challenged just like any business is about the investments they are making," he said. "And, because IT is a total cost of sales (like SG&A), everybody's trying to reduce their total spending and allocation. So this is a tool we've found to be extremely valuable in going back to our customers and describing to them what we actually deliver for them."