IT CAN'T SAVE YOU MONEY IF YOU CAN'T MAKE IT GO

Whether it’s for expanding onto the Web or other new media platforms, sharing services like traffic management among stations or complying with new SEC reporting requirements, media companies are investing heavily in IT projects these days.

So how do we optimize these substantial investments? Learning the language our accountants speak is nothing compared to decoding the jargon of the IT world.

Here’s a little something to help motivate that communication: you can improve the financial performance of your technology investments by 15%-20% within 12-18 months through three simple steps:

• Focus on quality.
  
  
• Develop strategies for implementing the technology.
  
  
• Include an effective change-management program.

That’s the advice of Deborah Brozina, managing partner of the media technology consulting firm Making Change Productions and author of an article entitled “Getting More Bang From a Technology Buck,” in the September/October issue of The Financial Manager, BCFM’s bimonthly magazine.

Deborah makes the case for improving communication between CFOs and CIOs by citing the example of a company that had to write down $2.7 million of an ill-fated technology investment over three years.

While the company assumed that the problem stemmed from a bad purchase decision, consultants called in to survey the damage found that the software choice contributed only 20%-35% of the cost of failure.

The majority of responsibility, ranging from 65% to 80%, was attributed to poor technology management by the company.

Long-term, sustainable cost reductions can only be achieved through developing and successfully implementing defined, repeatable and measurable processes, Brozina advises.

The strategies that can allow CFOs and CIOs to collaborate on improving the results of their technology decisions include:

Establishing Service Level Agreements. These internal SLAs should specify such things as:

• When the application must be up and running.
  
  
• When the application can be taken down for servicing.
  
  
• How quickly problems need to be resolved.
  
  
• Penalties for not meeting the defined targets, as well as disaster recovery agreements.

Defining Charge-Back Mechanisms. Once basic SLAs are in place, it makes sense to try to measure how much it costs in time and resources to meet the needed service levels.

Brozina recommends installing a time-tracking system and having employees and contractors charge their time to either “baseline” activity or projects. 

To measure the full cost for projects, the mechanism needs to track expenses that may be incurred outside of the IT department. For example, a member of the ad sales team might incur an opportunity cost by spending his or her own time trying to solve a technology problem himself or by hiring an outside “geek squad” to resolve the issue. 

The author also suggests using an initial survey of the processes and tasks that are taking place across business units in order to ensure that the true costs of maintaining and improving a system are captured. This survey becomes critical if the company decides to outsource some IT functions.

Developing Solid Methodologies. The company's business units and its technology staff need to share common project development methodologies.

Brozina recommends beginning with a clear project initiation process. It should define the purpose of the project and establish clear roles and responsibilities, including the ultimate sponsor for the project.

It’s essential to ensure that the financial benefits defined in the project’s business case are captured at the end of the project. This is accomplished by adding improved revenue to the budget or by taking the cost reductions out of the following year’s budget.

The product development methodologies also need to include a strong set of requirements. Because most media companies don’t have a history of developing IT requirements, she advises “time-boxing” a project—limiting the development time to three or six months to prevent analysis paralysis.

Finally, all methodologies should include multiple “Go/No Go” decision points. As Brozina points out, it’s far more cost effective to kill a project that will not produce adequate results than to keep it going out of inertia.

Creating a Change Management Program. Large projects are likely to have a significant effect on staff and radically change how staff members approach their jobs day-to-day, Brozina notes.

The company needs to develop a change management program that includes an assessment of the organization’s readiness for change and the staff’s capacity to support it.

As companies that have deployed shared services can attest, honest, timely and complete communications are essential. Employees need to know what they can expect. Effective change management also needs to anticipate and address the staffing changes that are likely to occur.

Looking at these four strategies, it’s easy to see how the planning and implementation for deploying new technology can represent the majority of expense or savings a business will realize.

And with so much focus on deploying new technologies for improving what we do today, and for expanding into where the media industry needs to be tomorrow, the stakes are higher than ever.

The September/October issue of TFM also reminds us that that there are high rewards associated with these higher-risk investments.

In an article entitled “Romancing the Internet,” cable industry veteran Lee Clayton Roper, a principal with Denver-based International Media Advisors, describes the revenues that media companies are generating through their initial forays into multiplatform content distribution.

Examples include ABC’s success in signing deals with 36 different advertisers to support the online streaming of shows like Desperate Housewives, Grey’s Anatomy, Lost and Ugly Betty.

Each advertiser paid a $25 cost-per-thousand (CPM) rate, compared to a $12 CPM for traditional broadcast TV across all dayparts. As Lee Clayton Roper notes, ad currency is changing from cost-per-thousand to cost-per-viewer, and the numbers are potentially very rewarding.

Additional stories in this “New Media, New Money” issue of TFM, developed by our editor Janet Stilson, a film writer and journalist specializing in the business of media, focus on dealing with the theft of private data, TVB’s ePort and the very real revenue potential of the online virtual world.

BCFM will also showcase additional tips and information for Making Money from the Growth in Personalized Media at our upcoming seminar, which will be held in NewYork, on Sept. 19. For information, go to www.bcfm.com.  

As Brozina’s article concludes, “When technology strategies are well executed, media companies can not only survive the tectonic shifts they face but emerge more profitable than ever before.”

Thanks to the support of our knowledgeable authors and presenters, BCFM is privileged to provide these essential insights for ensuring that our industry remains prominent with media consumers.

Mary Collins is the president of the Broadcast Cable Financial Management Association, a professional society for financial, MIS and HR executives in the electronic media. Her column appears here every other Friday. She can be contacted at mcollins@bcfm.com or 847-716-7000.