e-Talk Radio: Paul Hopkins, November 2000

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might take a look at IT spending, and I think that's traditionally how people have looked at it. It's IT spending. We've spent all this money on information technology, and what exactly did we get for it? What's the value to the business? What do we get for the millions of dollars that we're spending on acquiring hardware and software and all these people who keep working in this industry and working in our company? Is that kind of some of the things that you were being challenged with?

Paul: Yeah, that's exactly what it was. Not only did we have to justify our spending and the resources that we would be utilizing, but certainly with any company, you have a limited amount of resources, a limited amount of dollars, and you really need to focus on what's being done and what needs to be done to advance the company. We've done some, I've done some experimenting with the topic of function points. Having used them probably in the last ten years, at a previous job at General Electric as well, have used function points. And we could talk a little bit about that in a minute. But using function points helped me understand the application portfolio, in terms of what do we actually provide to our businesses here, from a systems standpoint? And then utilizing ROI, or Return on Investment, calculations. Actually return on function point calculations. Literally, how much are we spending to build an application, and what is the business going to get out of that? So actually experimenting and utilizing those calculations to help us prioritize, help us demonstrate the value of doing one project over another.

Carol: So you've essentially got, I guess like every IT department, a list of a lot of different projects that you could choose to do. A lot of different activities that you could choose to work on. A lot of different spending that you could choose to do. You could choose to do training. It's kind of like, how do you dole out these things to get the best value?

Paul: Right. And the particular challenge also is that typically we always fall back on ROI, or payback. And you know, that's typically a very short view of the money aspect. Versus what's the long-term payback, or what is the company actually going to benefit from later on?

Carol: Some people would kind of say, if I spend $4 million on this computer system, to develop it, including the hardware and software and the costs of developing it, I guess if I save 15 people, well that will pay for itself in two years or three years or something like that.

Paul: Correct.

Carol: That's the typical return on investment that you're talking about.

Paul: Correct. And it's a very simple calculation, and a lot of my finance peers love that view. But I also take that a bit further and say literally, what is this going to provide the business? Not necessarily the payback. And you can factor in many other different things around that. Such as, if you have value around applications that you build, around speed, how fast do you develop that and how fast do you get that to market? It could be life expectancy. How long will this thing last? And then there's also the aspect of percent growth. Literal dollar growth to the bottom line. How much does that provide? So you can use these factors to help weigh in actual application development and prioritization.

Carol: And one of the things that you

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