Measuring the Return on Investment of IT
W
ith a deeper insight into the capabilities of their IT,
modern businesses have the
ability to establish the economic case for investing in particular solutions. They can consider the cost of purchasing, deploying and managing hardware and software, and estimate the return on investment (ROI) likely to be generated by individual tools. Where this exceeds the total cost of ownership (TCO) for particular solutions, a case for investment is established.
But calculating ROI is not as straightforward as it may appear.
Traditionally,
budget holders have relied on the cost analysis when contemplating an IT investment, but rarely does this provide the rounded view businesses need to arrive at the correct decision. By focusing solely on expenditure and potential savings, companies fail to consider the metrics that really count. Although often more difficult to measure, it is the overall benefits a solution delivers to a company – beyond the IT department - that determine the wisdom of the investment.
ROI: What should businesses be looking for?
As well as cost savings in the industrial process, business leaders need to consider how IT solutions add value to the products and services they are selling. For instance, do IT tools help ensure greater quality of produce on the assembly line? Or does a program help deliver a more tailored customer service, helping to boost satisfaction and loyalty rates? Businesses generate revenue by delivering a high quality service to the market, and if IT helps to drive turnover, this must be considered in any TCO vs. ROI analysis.
Companies should be looking to assess the wider impact of IT within their organisation, but also isolate particular processes and establish the practical contribution made by different tools. IT can make a difference in the planning, production and post-production stages, and anything that contributes positively to the overall
customer experience should be considered a return on investment. As such it is a contributor to the ROI of IT. Where some solutions are concerned - for instance CRM tools - the principle benefits may be intangible, so it is vital they are accounted for.
Case study: The ROI of mobile devices
Equipping employees with tablets and smartphones may prove an expensive task initially for a company, and some critics may argue that desktop PCs and laptops already provide sufficient functionality for work- related tasks. Given that mobile devices lack a full-size keyboard and mouse facilities, it is possible to argue that what is gained in portability is lost in practicality. And in light of the security and governance concerns held by some, it is possible to conclude that the TCO is simply too high.
But when the wider ROI is considered, the case for investment is much stronger. Firstly, an employee equipped with a mobile device is able to work without interruption, irrespective of their location. Tablets and smartphones can be used to continue with employment tasks when an employee is away from the office, even as they commute. Where employees, wish to work flexibly, mobile devices enable them to do so. And when severe weather strikes, they may help reduce absenteeism.
Mobile devices are clearly popular with consumers – 23
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