There's a great scene in the 1993 comedy Trading Places when the main character, a snooty commodities broker played by Dan Aykroyd, gets fired and is forced to pawn his expensive wristwatch.

"This is a Roche Vouceau," Aykroyd's character tells the Philadelphia pawnbroker. "The finest water-resistant watch in the world. Singularly unique, sculpted in design, handcrafted in Switzerland and water-resistant to three atmospheres. This is the sports watch of the 80s. $6955 retail!

"You got a receipt?" the pawnbroker asks.

"It tells time simultaneously in Monte Carlo, Beverly Hills, London, Paris, Rome and Gstaad," Aykroyd replies.

"In Philadelphia," says the pawnbroker, it's worth 50 bucks."

Philadelphia pawnshops aren't the only places where value is subject to debate. When it comes to business technology these days, companies are asking hard questions about outlays for new initiatives.

Many companies stopped asking tough questions during the tech-spending frenzy of the late 1990s. Having resigned themselves to spending large sums on Y2K compliance, companies soon jumped on the consultant-driven bandwagon for the Internet "revolution". No one asked: "What's the return on this project?" - if they did, they were treated as bean counters with no vision.

During the last two years, we've seen the pendulum swing again. In the era of tight budgets and slower growth, technology's hottest toys aren't worth much today unless they deliver real value to the business.

Value for Whom

From my perspective as a CEO, the operative question in assessing IT value is: value from whose point of view? Customers, the folks in the back office and shareholders don't always have a common view of what constitutes a good technology investment.

Customers. In the eyes of your customers, any technology initiative is worthwhile if it makes your company easier and more convenient to deal with. Take the most visible manifestation of technology in business: the Web channel where your customers come to learn about your company and buy its products and services. In the investment industry, clients clamoured for online account access and got it, even though it might not have been in their best interest. Easy trading can tempt investors to buy and sell excessively, often turning a big nest egg into a small one.

Employees. The people who work with you define technology value differently. To them, the most worthwhile initiatives are those that make their job more interesting or free them up to perform more value-added tasks. In the investment industry, the advent of automated transaction capabilities a decade ago meant that our people no longer had to manually process every purchase, redemption or exchange. Instead, they could process by exception, focusing on transactions that required special attention.

Shareholders. Though it's important to serve the needs of customers and employees, for most companies it is the shareholder's definition of value that ultimately matters most. What's the return on investment? Will this new initiative provide economic value by improving quality, cutting costs or increasing revenue? To justify their existence, technology initiatives that are designed to meet a perceived customer or employee need must also provide value to the shareholder.

While the shareholder's definition is the one that must carry the most weight, major technology investments should be examined from three perspectives. To make sure that this occurs at Vanguard, we typically appoint an advocate for each point of view when we consider the business case for a major investment. Having people sit in those chairs, figuratively speaking, can be a good way to ensure disciplined thinking about value.