Impact of ROI on the Organization

ROI is a commonly used business measure that is used to quantify the business benefit of expenditures that range from an office copier to a completely outsourced network service. The result of a good ROI analysis is a clear and realistic idea of the potential benefits and risks associated with a business investment. The ROI for webbed services management investments has a harder side with quantitative information; another, softer, side may have equally important qualitative contributions.

ROI is becoming a key ingredient in the technology assessment and evaluation phase. I've spoken recently with several companies that are setting ROI guidelines for the earliest phases of the process. The message might be, "Don't bring anything to me that doesn't demonstrate a 25 percent cost reduction within six months." The good news is that standards for business impact are being integrated into the technology investment process, resulting in clearer guidelines for selecting products. At the same time, having a target makes it easier to manipulate the numbers to reach the specified goal.

In this context, selling the ROI is as important as selling the technical approach and capabilities of the IT group. It's important to address the concerns of key constituents early, to understand the objectives and issues of boundary organizations, and to get their expertise. Working on this process with the collaboration of your organization's finance professionals, who deal with ROI every day, and who have experience interpreting the economic issues necessary, can add substantial credibility to your proposal.

Note also that there are no hard and fixed rules for ROI; different companies ask different questions and allow different assumptions. Note, however, that whatever the range of differences, the basic model is the same.