Generating Premium Returns on Your IT Investments

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Although IT portfolio management has been a best practice for some time, many companies still generate substandard returns from their IT investments. The authors note that investing the right amounts in the right IT asset classes is only the first step — IT portfolio management techniques must be complemented by a suite of interlocking business practices and processes collectively labeled “IT savvy.”

The benefits of establishing such practices add up to a tangible IT savvy premium: The authors point to higher net profits and other performance gains for IT-savvy companies in the year following their investments in key IT asset categories. The article cites a range of organizations — from 7-Eleven Japan and Amazon.com to Raytheon and Carlson Companies — in which IT savvy is ingrained, informing many of the companies’ business decisions and sharply focusing their IT investments.

Starting with a refresher on the IT portfolio approach — and noting best-practices portfolio players such as UPS, Eli Lilly and Mohegan Sun — the authors draw on the findings of a multiyear survey to review the different IT assets in which companies invest before discussing the gap in IT investment returns that separates those with IT savvy from those without. They present five hallmarks of IT savvy and offer a series of practical suggestions for how managers can start to match IT savvy with the IT asset mix.

Peter Weill is the director of the Center for Information Systems Research at the MIT Sloan School of Management and MIT senior research scientist. Sinan Aral is a Ph.D. candidate in the Sloan School’s IT Group. Contact them at pweill@mit.edu and sinana@mit.edu.

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