Wednesday, August 15, 2018

Beyond ROI (Getting the Most from an ROI Study)

It has become fairly typical for decision-makers to require IT to do an ROI study to back up budget requests for technology acquisitions. The studies are used to help “sell” the project to decision-makers based on value. But often these studies are not used to their fullest extent to advance the company’s perspective of IT’s role in the organization.

Too often, once an ROI study is finished and the funding acquired, they are filed and forgotten. Sometimes this is done out of fear the studies won’t live up to reality. At other times the studies may be viewed as having done their work in getting funding approved and are no longer useful. This is unfortunate because there is still a lot of value left in these studies that can be used to enhance IT’s role in the organization.

After a project is completed, it’s rare for an organization to measure the success of those projects using the original ROI study as a template. Every ROI study factors in multiple cost structures, and each one plays out differently in the new environment. Some are predictably fixed; others can vary widely depending on circumstances.

For example, when a technology is being completely replaced, maintenance for the old technology can be accurately predicted to go away once the new technology is deployed. New maintenance costs, on the other hand, may or may not actually match what had been estimated. Implementation labor estimates can also vary widely. The more complex the technology, the more this cost element can differ from estimates.

Knowing how each cost element varied from original estimates can be extremely valuable for IT when doing future studies. If the project does not achieve the value initially measure, IT can learn from it and adjust subsequent ROI studies to measure the scenario more accurately

However, when the ROI study proves out by matching the actual facts, IT’s reputation is enhanced and these facts can be advertised to the user community at large. Similarly, if valuable use cases were developed, these can also be used to advertise IT’s success. The communication of success can build a loyal user community for future projects.

IT depends on the user community to help make a new technology a success. If the user community is a friend of IT, they will go out of their way to ensure a project succeeds. This becomes a virtuous cycle and drives tremendous value for the business.

Additional value can be extracted from these previous studies when the next request for project funding comes in. The new request can be backed up by historical evidence of success, helping persuade decision-makers to approve the new funding.

IT doesn’t have a lot of spare time. Many things that would be nice to do are often sacrificed because activities that need to be done take precedence. Measuring the success of a completed project is an activity that too often falls into the “nice to do” category, but given the value it can bring to the organization, it should really be placed in the “need to do” category. By making it a requirement to evaluate success after each project, you can make sure that every ROI study is leveraged for maximum IT value.

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