The Value of ConvergenceBy BTM Institute Staff Writer | Posted 2009-09-29 Email Print
Enterprises that have achieved business-technology convergence can respond nimbly to change and use their superior performance to leapfrog over less-agile competitors and position themselves for future growth.
The second annual Baseline/BTM 500 survey was conducted in the midst of the deepest economic downturn in our lifetime. While economic recession is certainly not good news, it does present a unique opportunity to test the promise of business-technology convergence. Would converged firms react? Would they perform as well in a down market as they have in up markets? Would they exhibit the resilience and agility that are the hallmarks of converged enterprises?
The results of the survey do indeed confirm the value of convergence. Of the five levels of maturity, the top two levels (Level 4, the threshold of synchronization; and Level 5, convergence) of the Baseline/BTM 500 organizations enjoy an advantage in positive performance results as compared with their industry groups. In addition, they clearly show that even when performing below industry averages, they are significantly better off than less-converged organizations. (See page 28 for a list of the top 100 companies that completed the survey across all four functional areas. To view all survey lists, go to www.baselinemag.com.)
The Baseline/BTM 500 report highlights participating enterprises that have the most efficient and optimized business-technology management and explains how that convergence contributes to growth and profitability. Business-technology convergence and business-technology management are terms that spring from a simple idea: Technology is a means for achieving business objectives; therefore, managing business and technology together provides significantly better results than managing them in separate silos. By converging business and technology management, enterprises can nimbly respond to changing marketplace dynamics, technology evolutions and competitive pressures—capabilities that are especially important during an economic downturn.
Determining the maturity level of an enterprise’s business-technology management is no easy task. The Baseline/BTM 500 is based on BTM Corp.’s BTM Framework and Business Technology Convergence Index, an ongoing study developed to measure convergence levels and financial performance of companies over rolling five-year periods. (Read “2009 Baseline/BTM 500 Methodology” below.)
Baseline and BTM assessed the survey submissions using the same methodology as last year. Performance was calculated using six financial measures relative to business-technology convergence: five-year averages for return on equity (ROE); return on investment (ROI); return on assets (ROA); earnings before interest, taxes and depreciation (EBITD); annual growth in revenue; and annual growth in earnings per share (EPS).
We also examined, as we did last year, the change in share price during the same five-year period. Nearly 58 percent of the companies in the top two levels exhibited superior or average performance, tracking with last year’s result of 60 percent. The study found that these companies experienced an average 5.9 percent higher rate of EPS, an average EBITD advantage of 9.4 percent, and an average ROE advantage of 6.8 percent over their industry peers between 2004 and 2008. Both ROI and ROA performance for Level 4 and Level 5 showed a 1 percent advantage over their industry peers.
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