Chapter13.ROI: Making the Business Case

Chapter 13. ROI: Making the Business Case

IT groups are under pressure from the various constituent organizations they serve, all of whom demand better service quality, higher stability, reduced operations costs, and slashed capital expenditures. As is true for any functional organization, IT today must balance the external competitive pressures with the internal business pressures.

There is continual pressure to improve the end user's Quality of Experience (QoE). Current performance and availability levels become the norm, and pressures to match or exceed competitors' service quality is unrelenting. There are plenty of ways to spend more money to improve user experience. Infrastructure capacity must be upgraded to accommodate new growth and a wider array of services. The appropriate management tools must also be acquired and enhanced. Additional expenditures for external providers and outside consulting may also be needed.

At the same time, businesses of every size and type are scrutinizing their IT investments more closely; they also want to understand the business case for making more investments in technologies that have often failed to deliver better customer experience or improved Return on Investment (ROI).

Delivering a strong ROI is a response to internal business pressures to continue driving costs and delays out of every business process. Technology investments have often failed to deliver the expected benefits and are naturally eyed with appropriate skepticism. The process of assessing ROI can be quite helpful in aligning IT with business goals and then assessing contributions of IT to competitive advantage.

ROI is the tool used by business managers who are removed from the technology details, especially as purchasing decisions are being centralized. Technology investment decisions are made at higher levels in the organization, where upper managers attempt to find the least disruptive ways of trimming budgets and head counts. The ROI analysis undertaken by IT to justify its decisions must speak the language of business requirements as much as possible, but without letting go of solid technical foundations. If IT doesn't perform the ROI analysis, it's very possible that it will be done by someone who doesn't completely understand the full scope of project benefits. The ROI calculations will therefore be misleading and may fail to support a project that would actually help the enterprise.

This chapter covers the following topics in detail:

• Impact of ROI on the organization

• A basic ROI model

• Soft benefits

• An ROI case study