Hackett Research Alert: Excellence in IT Business Value Management Drives Real Financial Returns
April 08 2008 - 9:30AM
Business Wire
IT excellence can drive real improvements to a company�s bottom
line, according to new research from The Hackett Group (NASDAQ:
HCKT), a global strategic advisory firm. Hackett�s latest Book of
NumbersTM research finds that companies that are top performers in
IT Business Value Management (IT BVM) also outperform their peers
across a wide range of financial and profitability metrics,
including net profitability, return on assets, and return on
equity. IT BVM represents an integrated set of management processes
designed to maximize the economic value you can drive from IT
capital investments and operating expenditures. Business value
creation is a key yardstick for measuring IT�s contribution to
overall organizational performance. According to Hackett�s
research, when compared (by industry) to typical $22.3 billion
Global 1000 companies, top IT BVM performers generate $1.07 billion
more operating profit on an annual basis and $645 million higher
net profit. In addition, not a single company in the Hackett study
was able to deliver superior financial performance without also
being a top performer in IT BVM. Hackett�s latest Book of Numbers
volume, entitled �Delivering IT Performance Through IT Business
Value Management,� found that top performers excel at all four key
IT BVM process areas: business value governance; performance
management; portfolio management; and IT financial management. Top
performers have very different IT investment profiles than their
peers. At typical companies, the largest IT investment is for
�infrastructure refresh.� By contrast, top performers spend most of
their capital on �innovation and improvement,� usually in the form
of discretionary projects. Top-performers in IT BVM also manage
their IT project pipeline much more effectively than their peers.
They weed out the least promising initiatives early on, approving
and funding only half as many project proposals (40% versus 88% for
typical companies). Then, they initiate and complete a much larger
percentage of the projects they approve. Finally, top IT BVM
performers are nearly two times more likely to meet cost targets on
IT projects as typical companies and nearly three times more likely
to meet benefit targets. �IT represents the largest capital
investment category in many companies, and the largest G&A line
item. Yet most companies focus on maximizing the efficiency of IT,
viewing it simply as a cost to be contained,� said Hackett Senior
Business Advisor Erik Dorr. �The ability to maximize IT
effectiveness � the value IT delivers to the business -- is still
relatively immature. Our IT BVM research clearly quantifies the
value of focusing on IT effectiveness, and offers solid validation
of the relationship between IT investment, business value creation,
and competency in IT business value management.� According to
Hackett Chief Research Officer Michel Janssen, �The IT BVM
processes we�ve identified represent only 3% to 7% of the overall
IT processes and resources. Yet by excelling in these areas,
companies can drive dramatic bottom line benefits. Companies that
accomplish this understand that the need to �get IT right� is one
of the critical capabilities to stay ahead of the competition.� IT
BVM is the latest of several key operational areas that Hackett has
correlated with superior financial performance over the past few
years. In 2006, Hackett research showed that companies where
finance organizations excel at Enterprise Performance Management
deliver higher equity market returns than their peers. A separate
2007 Hackett study showed that companies where HR achieves top
performance in Talent Management also drive superior financial
performance. While correlation of these competencies with financial
performance does not prove causation, Hackett finds that excellence
in these areas is a consistent attribute of high-performance
companies. A Research Insight providing more details on the
findings described here is available, with registration, at the
following URL:
http://www.thehackettgroup.com/studies/itbvminsight/. About The
Hackett Group The Hackett Group (NASDAQ: HCKT), a global strategic
advisory firm, is a leader in best practice advisory, benchmarking,
and transformation consulting services, including shared services,
offshoring, and outsourcing advice. Utilizing best practices and
implementation insights from more than 4,000 benchmarking
engagements, executives use Hackett's empirically based approach to
quickly define and prioritize initiatives to enable world-class
performance. Through its REL brand, Hackett offers working capital
solutions focused on delivering significant cash flow improvements.
Through its Hackett Technology Solutions group, Hackett offers
business application consulting services that helps maximize
returns on IT investments. Hackett has worked with 2,700 major
corporations and government agencies, including 97% of the Dow
Jones Industrials, 73% of the Fortune 100, 73% of the DAX 30 and
45% of the FTSE 100. Founded in 1991, The Hackett Group was
acquired by Answerthink, which was renamed The Hackett Group in
2008. The Hackett Group has global offices in the United States,
Europe, and India. More information on The Hackett Group is
available: by phone at (770) 225-7300; by e-mail at
info@thehackettgroup.com; or on the Web at www.thehackettgroup.com.
Book of Numbers is a trademark of The Hackett Group.
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