This summer Gartner Executive Programs and MIT Sloan School’s Center for Information Systems Research (MIT CISR) published a report on the Advantages and Economics and Value of Reuse. (Executive Summary) The report is based on a study of more than 1,500 companies to understand the impact of reuse.
The joint study defined reuse as using existing business processes, applications, data and technologies to improve performance. One of the findings of the analysis related to understanding the relationship between reuse and financial performance. The original report looked at financial performance in 2008. One of the findings was companies with high reuse experienced higher profit margin and revenue growth.
The question arose regarding the importance of reuse in a time of recession, so we updated our analysis to include 2009 financial data. The results indicate that firms with higher levels or reuse experienced higher average net margins and revenue growth than firms with low levels of reuse for the period 2008 – 2009.
We have updated the analysis to include 2009 financial year-end results. These results show that reuse remains relevant even in an environment of recession.
- Comparing revenue growth between 2008 and 2009 revenues, high reuse firms suffered less in the recession with an average revenue growth of -0.8% versus low use firms with an average of -2.6%.
- Comparing average net margin, high reuse firms were able to maintain margin with an average of +2.8% versus a -0.2% for low reuse firms during the same period.
- High reuse firms had an average return on invested capital (ROIC) of +5.5% in 2009 versus low reuse firms with an average of +3.7%.
From these averages it is clear that firms with higher levels of digital reuse weathered the recession from 2008 to 2009 better than average and better than firms with low levels of reuse. Reuse supports having greater revenue growth, higher net margins and stronger returns on invested capital in the way it leverages existing solutions and skills to deliver results faster, with less capital and lower risk.