|
 Calculating
ROI (Return on Investment) on IT is no longer optional;
it is rapidly becoming a requirement prior to any capital
investment in IT. In the recent Network Magazine-ORG-MARG
survey (Infrastructure Strategies 2002), 34 percent
of the IT Heads said they consider ROI as an important
decision-making parameter for an IT investment.
So what exactly is ROI? Simply put, ROI is the benefit,
usually profit or cost savings, that accrue from a capital
investment. These benefits are usually accounted for
over a period of time, 3 years being the industry norm.
ROI can be used for dual purposes: to develop a business
case for justification of investment in a particular
vertical or project and also to gauge how well an enterprise
is managed.
The need for ROI
IT offers enormous benefits to an enterprise. In fact,
IT has emerged from being just a back-office support
function to become a vital business enabler.
Over the last few years the use of IT in enterprises
has grown significantly. Then, there are the service-driven
and process-centric industries where IT forms the core
without which the business could not exist. The criticality
and initial high investment that goes along with any
IT project makes it mandatory for the IT Heads to properly
calculate and justify ROI on IT budgets.
The silver bullet
So is ROI the silver bullet to analyze all IT investment
decisions? Are all IT benefits quantifiable? For that
matter is ROI the right or only way for measuring returns
on IT investments? If so, how does one derive ROI and
present his case before senior management? And how does
one consider the qualitative factors that play an equally
significant part?
There are many important questions that the very mention
of ROI on IT brings up. Explaining how to calculate
ROI based purely on some analytical techniques would
be a wasted effort. Not only would we ignore the qualitative
(or intangible) factors that play a significant role,
many of the major benefits would not be highlighted
at all.
To throw some light on these very issues, we thought
it would be best to ask the IT Heads themselves, since
calculating and justifying the ROI is one of their core
responsibilities.
What we have in the next few pages are some eminent
IT Leaders from diverse industries talking about how
they calculate ROI, the qualitative factors they take
into consideration and on how to convince senior management
to adopt a particular technology for their enterprise.
|
|| Feedback
|| Subscribe-
