ROI: Fiscal phantom still lurks
in technology's many crevices
Suppliers like Ben Smylie used to have it a lot easier when it came to making a case for new technology.
A couple of decades ago, a supplier could walk into a newspaper publisher's office with just a few charts and diagrams and proceed to easily show how many full-time jobs would be unnecessary once a new pre-press system was installed.
Those job savings could quickly be translated into three magic words -- return on investment (ROI). The easy-to-apply concept would tell a publisher just how fast he or she could see financial benefits from a new pagination or classified system.
"Back then, the savings were phenomenal," said Smylie, vice president of North American operations for Atex Media Solutions Inc. in Bedford, Mass. At the Chicago Sun-Times, where he was working at the time, Smylie saw the composing room shrink from 500 people in 1974 to about 60 by 1980, thanks to investments in technology.
It didn't take a genius to see just how quickly a newspaper like the Sun-Times would begin to realize its ROI. All you had to do was walk through the pre-press area to witness business moving at a faster clip -- amid lots of empty desks.
But these days, with fewer places left to trim, coming up with a clear-cut way to demonstrate ROI is tough.
"The ground has already been plowed in terms of cutting positions," said Nelson Clyde IV, vice president of sales and marketing for the family-owned Tyler Morning Telegraph in Tyler, Texas. "It takes a lot more salesmanship to sell a system today than it did 10 years ago."
ROI may appear to be dead, but folks like Clyde and Smylie will tell you that reports of its death are premature. ROI is simply a much different animal than it was in the 1970s.
"I don't think we can talk about it in the concrete terms that we did in the past," Clyde said.
The traditional way of calculating ROI -- adopt new technology, then reduce the payroll and add up the money you save -- is history, said Joe Cillo, director of information systems at the Plain Dealer in Cleveland.
"For the most part, that ROI got used up because it was saving bodies," Cillo said, "and you can't save them more than once."
While companies may still find a position here or there to do away with as software becomes more advanced, these days calculating ROI is more complex. The equation now measures not what's lost -- jobs -- but what's gained.
"Now you get into issues that are harder to measure," said Clyde, citing quality, productivity, reporting and efficiency. "You can't make it as relevant as when you were cutting positions."
Much more complicated
Making a case for new technology now requires more sophistication, with proponents arguing that technological investments provide efficiencies which don't necessarily translate into easy-to-see savings.
"Like everything else in the newspaper industry, ROI is much more complicated," said Jim Mosely, chief executive of NewsEngin Inc. of Narberth, Pa. "It's gone from black-and-white to a lot more complex gray."
While ROI is being redefined, it has also gone through a honing process. "ROI is coming at very fine levels," Mosely said.
At the Plain Dealer, documenting gains is crucial, Cillo said. "The key is that you need to give them something that's measurable," he said.
Cillo uses several criteria when pitching new purchases to the publisher, and the finance folks who keep a close eye on technology spending. They include added capabilities, cost avoidance and the contribution to quality that will come with an upgrade.
Demonstrating cost avoidance is akin to old-style ROI. Moving to digital cameras makes good business sense if you can document savings to be gained in dispensing with film, chemicals and related equipment.
"The more of the criteria you can address, the better chance you have of getting approval," he said. "Normally, quality falls as an intangible, but it's important."
That's because for most newspapers, quality can translate into readership, which down the road can swell the bottom line.
Though ROI may look a lot different, it is still critical to those who sign off on capital expenditures and those who have to decide what gets funded in a tough budget year.
"We still have to build a business case," said Tim Betz, director of information technology for the Akron Beacon Journal in northeastern Ohio.
There are many ways to make a case, he said, but two specifics must be addressed. "You have be able to show incremental revenue or additional efficiencies -- and it's hard to show efficiencies," he said.
Layered on top of that, Betz and others say, is the importance of leveraging technology to stay ahead of, or at least equal to, the competition. "We always look at what we can do to get ahead of the competition," he said.
For a newspaper like the Beacon Journal, which is part of a large publishing company (Knight Ridder of San Jose), getting the green light for a significant technology purchase can be easier if there is a direct link to the company's overall strategic vision.
If Betz can show that the major upgrades he wants are consistent with Knight Ridder's overall standards, he's more likely to win approval. And moving to new systems is now a foregone conclusion, with Knight Ridder recently having settled on one company for advertising (Mactive Inc. of Melbourne, Fla.) and another for circulation (Data Sciences Inc. of Laurel, Md.).
Delivering a better newspaper
Measuring ROI now means looking at how technology can increase reader and advertiser satisfaction as well as save money, however small the increment.
Improvements in color reproduction, for example, will mean happier advertisers as well as readers. In the long run, that can have a positive impact on the bottom line as more advertisers buy color ads and more readers find enjoyment and value in good color reproduction.
The variable on which ROI hinges now has morphed from dollars saved to hours saved. Eventually, a case can be made that by saving hours, you're saving money -- but connecting those dots is often difficult and can be open to interpretation.
NewsEngin's Mosely sees ROI evolving just like technology, with the time-related calculation of ROI as the next step. "What we've done is moved to the next level of ROI," he said.
Mosely said more and more companies are realizing that technology that enables their people to work smarter brings in a substantial return on the initial investment in the long run.
Mosely believes that through technology, newspapers can prioritize the tasks they ask the staff to do, thus allowing reporters, for example, to spend more time reporting.
"There's more and more work for people in the newsroom to do every day," he said. "The newspapers that are successful in serving their readers are the ones who can devote their energies to the most critical tasks."
That, Mosely said, means better quality in the long run.
"Newspapers," he said, "have to ask, 'Are we saving money, or are we positioning ourselves to make money or be more competitive?'"
Letting technology handle the mechanics of updating a web site, for example, ultimately will benefit readers, Mosely said. "When you can spend more time on your web content instead of cutting and pasting, you'll have a better site," he said.
Atex's recent foray into electronic tearsheets is an example, Smylie said, of how technology can be used to save time that translates into money. Because the tearsheet process involves a lot of subtleties, determining the return on an investment in new technology can be difficult.
"You need to sit down, build a map and show how a system will alleviate steps," he said. "In the end, process improvements equal hours, materials and associated cost savings."
Smylie contends that improving processes through technology provides a valuable return on investment all by itself. "ROI lives," he said, "and each of the people involved in a process owns a part of it."
Helping IT, too
Betz believes that an investment in technology can save time twice -- in the department using the system and in the information technology department charged with maintaining it.
Improvements in technology, he said, can often mean that IT staff can be moved around to address more critical needs, thus improving efficiency.
With ad revenues sagging and newspapers struggling to keep shareholders happy, Smylie said specifics on return are now more important than ever for suppliers and those trying to persuade management to loosen the purse strings.
"Right now, the process of re-engineering has to be very clear and the payback has to be immediate," he said.
Of course, that may be easier said than done as technology continues to evolve. Said Smylie: "The more complicated and the more sophisticated the systems get, the more work is involved to document associated savings."
One area where it is difficult to document ROI through associated savings is in replacing aging technology with more up-to-date software and hardware.
In Tyler, where Clyde's family members make financial decisions free of worry about analysts and investors, the return in using up-to-date software and hardware is difficult to measure. Clyde likens it to choosing whether to put a new transmission in a car with 120,000 miles on it or just buy a new car.
"It's not so much about return, it's about making a commitment so people will have the best equipment to do their jobs," Clyde said.
For many newspapers, the decision to upgrade existing equipment can often be tied to how well the company is doing financially. Often the upgrade will be put off for a year or two, if possible.
But that opens the door to a factor that trumps ROI -- publishing at all.
"Companies are trying desperately to pull justification into their business model," said Stephen Dienna, vice president and general manager of the media division for Unisys Corp. based in Roswell, Ga. "But the one fact they can't eliminate is the risk of not publishing."
By continuing to use antiquated equipment, Dienna argued, newspapers run the risk of not being able to get support or get hardware parts. And without support in times of crisis, they may not be able to keep going.
With technology driving the industry, more publishers are calculating this risk and balancing it against the return on investment that usually comes from extensive analysis.
"Both the accounting side and the publishers have become more knowledgeable," said Cillo. "They're asking tougher questions and they understand the upside and the downside. But I'd rather have the tough questions now."
And because there remains a focus on a return on investment during tough times, Mosely believes it's more imperative than ever for suppliers to do their homework.
"It behooves everyone who sells software to make a stronger case," he said.
-- Rich Pollack; rp@colepapers.net
Atex Media Solutions Inc.,
(781) 275-2323,
e-mail: info@atex.com;
Data Sciences Inc.,
(301) 957-0100,
e-mail: danm@data-sci.com;
Mactive Inc.,
(407) 435-0215,
e-mail: info@mactiveinc.com;
NewsEngin Inc.,
(636) 537-8548,
e-mail: info@newsengin.com;
Unisys Corp.,
(716) 742-6780, ext. 674,
e-mail: william.wenger@unisys.com.
| 