What’s your Return on Investment?

In today’s Web-enabled world, firms ask two important questions before making IT investments. How will being

web-enabled increase revenues or reduce costs? 

The last few years saw an explosive growth in the IT industry. Everywhere, you heard how the new economy was replacing the old–how ‘upstarts’ like

Amazon.com, Toys.com,

Pets.com, and Ebay.com

would pull down the traditional brick-and-mortar giants. Many brick-and-mortar companies raced to build e-marketplaces and get Web-enabled with the

battle cry ‘time-2-market’.

But in one year, these demands have changed to cries for help. Many firms that had ‘high-growth stocks and exciting futures’ are no longer in business. The ‘pure-play’consulting firms have been forced to lay off staff, and some like MarchFirst have even filed for bankruptcy. Brick-and-mortar companies are no longer in a hurry to be Web-enabled, and the new economy has not replaced the old one. The basic rules of business today are as valid as they were a hundred years ago–a sound business model based on a good revenue model.

However, the Internet remains a key IT strategy of most firms for the benefits it offers. It is just that IT initiatives are now weighed carefully against two fundamental criteria–the potential to increase revenues, or cut costs. If neither is met, there is little enthusiasm to proceed. 

What does this mean for India?

Two factors will benefit the Indian IT industry. One, a recent survey of US CIOs, reveals that many projects are continuing and IT spending is still higher than last year, by about 9 percent. However, many of the companies surveyed are taking a hard line on where their IT dollars will be spent. Research projects are being cut and companies are proceeding only when a clear return-on-investment (ROI) is identified. Also, many internal projects are now outsourced. 

Two, the Internet has enabled collaborative technology that was previously difficult to implement, and required manual intervention. These tools provide for immediate analysis of offshore projects–the activity status can be checked, approved, and problems dealt with–making it as reliable and transparent as on-site ones. Indian IT firms can now address the concerns of US and European companies about losing control, if a project is done offshore. 

Hence, what the current environment needs, is a focus on the part of our IT firms to address issues of lowered costs or increased revenues for their clients. 

Arjun Malhotra,a co-founder of HCL, is

currently chairman and CEO of TechSpan