Welcome to WCG's TCO Newsletter! This free quarterly newsletter provides the latest information on trends in IT Portfolio Management, IT investment strategies and new ideas for optimizing your IT portfolio.

FEATURED ARTICLE:

There's more to financial metrics than ROI

The past 2 years have seen a dramatic change in the way companies measure IT value and, therefore, evaluate IT investment decisions. As companies move towards adopting IT Portfolio Management practices, many are incorporating TCO and ROI measures as part of the purchasing process. While these metrics are extremely important, there are other, often overlooked metrics that companies can use to gain an even greater understanding of a project's value. These metrics include Net Present Value (NPV) and Internal Rate of Return (IRR).

Net Present Value, or NPV, can be defined as the project's net contribution to wealth; i.e. present value minus initial investment. It is often considered more useful than ROI because it takes into account the time value of money. NPV analysis yields a result, expressed in after-tax dollars, that takes into consideration the difference in the value of future cash flows and the cost of raising the capital required for the investment. Projects associated with a positive NPV represent net savings for the organization. Projects associated with an NPV of zero will recuperate only the cost of the capital required to make the investment. Projects associated with a negative NPV represent a financial loss for the organization. NPV is particularly useful when choosing between 2 projects with similar ROI's- the one with the greater NPV will contribute most to the overall wealth of the organization.

Internal Rate of Return, or IRR, is a project's annualized rate of return, taking into account both the amount of money invested and the length of time it has been invested. IRR may be defined as the interest rate that equates the present value of an income stream with the cost of an investment. As a rule of thumb, projects with an IRR that is higher than the cost of borrowing money to fund the project should be accepted, while those with IRR equal or lower than the opportunity cost of capital should be rejected.

While these metrics are regularly used by CFO's and other Finance Managers, CIO's and IT Managers often do not have the time or resources to analyze and understand their project's economic value in these terms. WCG's TCO e-Valuator software provides detailed analyses of an IT organization's current financial picture in terms of TCO, ROI, NPV and IRR. This analysis is presented in clear, easy-to-read reports that can be generated to facilitate greater business to IT alignment. For more information about WCG's TCO e-Valuator software, click here.

Still not convinced that you need to utilize financial metrics? According to ComputerWorld, it's the practiced use of these metrics that sets ComputerWorld's Premier 100 IT leaders apart from other companies- to learn more, click here.

UPCOMING EVENTS

Join WCG and Sun Microsystems for the upcoming South African Executive Breakfast Series: Total Cost of Ownership: What does it mean to you?

Executives from WCG and Sun will discuss effective strategies for implementing a TCO practice and provide real-world case studies of companies that have successfully lowered costs and improved return on IT investment.

Dates and Locations:

28 January, 2003: Durban, South Africa

29 January, 2003: Cape Town, South Africa

30 January, 2003: Johannesburg, South Africa

For event details and registration, please contact Mpho Ntomane at mpho@eventdynamics.co.za.

WCG NEWS

WCG's South African team has recently partnered with Accenture to deliver an in-depth TCO Analysis and IT Enablement solution to the Johannesburg Securities Exchange. WCG's new strategic partnership with Accenture has already added considerable value to Accenture's offer to their customers, and their adoption of the WCG TCO e-Valuator Toolset and WCG's Systems Consolidation Assessment Methodologies is seen as a crucial first step in building an essential business relationship between our two firms.

WCG is pleased to announce the expansion of the North American team with the addition of Darryl Bowen as Vice President of North American sales. Darryl is a proven leader with a track record of demonstrated success in leading large-scale sales initiatives, leading-edge technology programs, and operations management. He has held senior-level positions with companies such as Martin Marietta, Booz-Allen & Hamilton, Mc Donnell Douglas, Hewlett Packard, StoragePlus, and Stoneridge Consulting. Welcome Darryl!

INDUSTRY NEWS

As enterprises move to financial metrics as a way of evaluating IT investment options, vendors are rethinking their sales strategy to appeal to a more cost-conscious buying audience. Click here to read what HP CEO Carly Fiorina said about trends in IT purchasing.

IT PORTFOLIO MANAGEMENT WHITE PAPER

Looking to reduce IT costs while increasing efficiencies? In today's tough financial climate, most companies are struggling to reduce costs quickly, without hampering productivity or making costly mistakes. By implementing an IT Portfolio Management strategy, you can identify areas for cost reduction, prioritize investments, and optimize your resources. To learn more, download our new white paper IT Portfolio Management: the Need for a Financial Approach.