Insider Business Club: measuring technology ROI

Has the economic climate forced a greater focus on return on investment
in IT?

Paul Sparkes, product director, IRIS

It is about prioritising. Often there are too many opportunities or projects
that you can follow. It is about choosing the right area to invest in that is
going to give the greatest return in the relevant timescale.

The key point with any decision is that there has to be a compelling business
case. And for the strongest case to be put across, inevitably it has to be
coming from which ever part of the business needs that investment. The
difference between success and failure is often not about the actual product
purchase, it’s about the human factors such as the project approach and the
training. Even prior to purchase, you need to focus on making sure the project
is structured in such a way that it will deliver the organisational goals and
protect that return on investment.

Is there such a thing as best practice in measuring ROI?

Dan Hooper, director, Piccadilly Group

People like to think there is a silver bullet; that we can take standard
measurements and it will apply to every situation. The big hole is around how to
quantify the soft benefits because stakeholders have lots of different
requirements and they generally have a different perception of what is quality
and what is success.

If clients do have historical data from other projects, they don’t really
know how to put it into a usable format. The CTO wants different information to
the financial director, so it is very important to make sure you are all talking
the same language and for you to agree what you are going to measure.

There are always going to be new technologies. Companies have to be honest
and ask what advantages this really give them, will it be reliable, will
implementing a new base technology cause more headaches because it is constantly
breaking down. You shouldn’t have overreliance on any one technology. Most
people don’t see the total cost of technology. Software might become shelfware
that companies never use but are still paying the licence fee five years down
the line.

How good a job are businesses doing of measuring the value of their IT

Kirstin Gillon, technical manager, ICAEW IT Faculty

Survey evidence shows us that people consistently struggle to apply
techniques to measure ROI and even if they do apply standard measurement
techniques, they are sceptical of the answers they get. The issue exists across
the board in terms of sector or size of business. I haven’t encountered anyone
who has said that they have really cracked it and are confident with what they
are doing.

The measurement should help managers make better decisions, it should help
them compare opportunities, it should help them to track and manage investment
and projects better. It should help people get more value out of the projects
they undertake.

The same piece of technology can be implemented very differently in different
organisations and sometimes it can give you advantages and sometimes it can’t.
Simply looking at the technology is missing the point.

People need to be a bit more structured and a bit more proactive about how
they identify their benefits. A lot of IT projects tend to stop with the point
of view that we are going to implement a system and we have a cost. Then they
scratch around and try to work out what the benefits are going to be.

How easy is it to put the theory of ROI measurement into practice?

Stuart George, financial director, Audio Partnership

Measuring ROI is something that we wrestle with in our business on a daily
basis, whether it’s the products that we are looking to develop, or the projects
that we are investing in. The disciplines and methods that you can use to
measure both can be very similar. But that doesn’t make it any easier to do.

There has been a lot of uncertainty around all businesses. And now there is
talk of green shoots, I’m not absolutely sure of whether it is green shoots or
whether people have less uncertainty. But uncertainty causes you to wonder
whether your competitors are doing something that is going to give them an
advantage over you. If you know what you are doing and are convinced about your
own objectives, you don’t need to worry quite so much about what other people
are doing.

Every IT project that we have embarked on has been different. Using your
experience is one of the best tools that you can apply. From an industry wide
point of view, it is searching out other companies who have had experience in
the past and seeing how they have done it. Often it is less about who the
company is and what sector they are in and more about what they actually do.

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