ROI analysis of IT projects and upgrades

The ROI calculation of IT projects is commonly accepted as ROI = Average Benefit Over Three Years/Initial Cost

As IT budgets tighten, getting approval on new projects is getting harder and harder. After years of heavy IT spending with no clear returns, and economic downturns; upper management is starting to demand more concrete justification for every IT dollar spent.

With the increasing stress placed on IT managers to “do less with more”, employees must possess more business savvy to gain the support of upper management on new purchases. Executives need quantifiable measures and metrics to ensure that new initiatives will directly improve the bottom line.

This is where the term ‘return on investment’ (ROI) comes in. It may be a rude awakening for the IT manager who has been given a budget and unlimited discretion on how to use it for years, and then is asked for an ROI analysis or outlay suddenly. This is where North American Systems International comes in. Our staff includes a number of former IT managers who know the ins and outs of analyzing ROI, and can help you get the green light on your next project.

More About ROI

• Top tactics for getting your purchase approved
• Assessing your ROI potential
• Common mistakes in determining ROI
• Why should you maximize the benefit now?

Top Tactics For Getting Your IT Project Approved

1. Align your initiative with declared corporate management objective
2. Partner with business managers to help champion and/or pay for procurement
3. Stagger implementation to reduce lump-sum costs, thus likelihood of getting approved
4. Use previous successes to reinforce the solid value of your technology buys (go back to some of your more successful projects in terms of ROI, and highlight them)
5. Adjust your budget process to allow for potential midyear additions
6. Focus on quantifiable cost savings and benefits

Assessing Your Project's ROI Potential

The two most important factors to first look when assessing ROI potential are:

1. Breadth - How many people will be helped? If it saves a miniscule amount of time, but is used by everyone in your organization, it might be worth it.
2. Repeatability - How often will people use the application? Obviously you might see a return much sooner by automating daily tasks, rather than tasks that are performed annually.

Other factors you want to consider, are the potential to re-use the gained information in other areas, the increased collaboration to reduce more costly communication, and the cost of the task which is going to be affected.

Common Mistakes To Avoid When Determining ROI

There are many easy mistakes people can make when analyzing ROI. When you are working on your next project when you start thinking about ROI, remember:

1. Don't concentrate on minimizing the cost. Focus on maximizing the benefit
2. Don't include unassociated costs (for example, factoring in the original cost of existing equipment that will be utilized in your new project)
3. Include indirect benefits. Creative thinking is crucial in thinking holistically about how to maximize your potential ROI
4. Include benefits from employees not on the critical path
5. Be sure to include the decreased maintenance required by newer equipment versus the old

Why Is Now A Good Time To Start IT Projects?

During these tough economic times, new purchases may be hard to justify. It is important to note that, since many of your competitors are standing still on new initiatives out of fear, a successful IT project which improves service levels or employee productivity might just leave them in the dust. Giving your company an unfair advantage over the competition will make you a hero (and make future IT purchases a breeze).

Companies can only cut costs so much to improve profitability. The benefits to be gained from increasing worker productivity or improving customer satisfaction can be a huge boost to profitability. This is where we come in, because our expert consultants have years of experience convincing senior management to sign off on new technology purchases and projects. Our team of representatives are creative thinkers, and can provide insights into the cost savings, increased productivity, and other indirect benefits you may experience from implementing your IT project. We can also provide some insights of original ways to save money, and reduce total cost of ownership.

With our experience in ROI methodology, we can show you how to prepare an ROI analysis or outlay, and what to emphasize during your presentation. In fact, you may even get an unbiased opinion on whether this project is the best fit for you, because we understand that our success hinges on yours. This would explain why we've been in business for the past ten years. We succeed at creating meaningful partnerships with our customers

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