ROI for Technology Projects: Measuring and Delivering Value
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"A new way for measuring and valuing technology initiatives has been revealed. ROI should be part of every discussion when a firm is evaluating key technology investments within their organization. One of the smartest moves a technology professional could make is to educate themselves on the ROI methodology to demonstrate the value of critical technology initiatives within their organization.” Richard G. Klingshirn, CPA, Executive Managing Director, Affiliated Computer Services, Inc.“ROI should be a key component of any technology investment decision. This book provides an approach which can be applied to just about any technology project across any industry to ensure decision makers have a clear understanding of the return they should expect before making strategic technology investments. Once embraced by an organization, ROI will become part of every technology discussion to ensure companies maximize the return on their strategic technology investments.” Dan Vetras, President and CEO, Talisma“ This book would be of value to any company to truly expose the ROI for their IT or Technology Development departments. Many executives view technology as a costly necessity, this book provides the tools necessary to ensure companies understand the true value of technology which will facilitate continued investments in IT knowing the return is there both in tangible and intangible ways.” William H. McGill, Chairman, CEO and President, MarineMax“ This book is a must read for any technology professional who is a champion for strategic technology investments. ROI is the best way to expose the value of making strategic technology investments in any company. This book provides the communication mechanism and measurements that technology leaders require to effectively communicate and mobilize key technology projects and initiatives.”Tony DiBenedetto, Chairman & CEO, Tribridge ConsultingROI for Technology Projects: Measuring and Delivering Value presents a proven Return on Investment (ROI) Methodology, based on almost 20 years of development and improvement. It is a process that is rich in tradition and refined to meet the demands facing IT and technology development projects.With increased scrutiny of technology spending by the most complex organizations in the world, ROI has become one of the most challenging and intriguing issues facing the Information Technology sector. The profession requires a rational, logical approach that can be simplified and implemented within the current budget constraints and resources of the organization. This is the first book of its kind to do just that and is written by two experienced authors in the field. Practical and well-structured ROI for Technology Projects: Measuring and Delivering Value provides a framework and method that can ensure greater success in mobilizing technology initiatives. Written for managers and executives who are tasked with implementing and executing key technology projects and initiatives within their organizations. It will also be of interest to technology consultants, business analysts, and practitioners who are responsible for scoping, designing, and implementing key technology initiatives within organizations.D. Brian Roulstone is the Chief Information Officer and Chief Technology Officer of Bisk Education, a leading provider in the online post secondary education and corporate training markets. Jack J. Phillips is Chair of the ROI Institute, Inc and developer of the ROI MethodologyTM
Preface ixAcknowledgments xviAbout the Authors xviiiMeasuring the Return on Investment for Technology Initiatives: Trends and Issues 1ROI Progress and Status 3Why ROI? 9ROI Concerns 14Barriers to ROI Methodology Implementation 20Benefits of the ROI Methodology 22ROI Best Practices 23Final Thoughts 27References 28The ROI Model: History and Background 29Building the ROI Methodology 29An Evaluation Framework 31The ROI Model 34Operating Standards and Philosophy 48Implementation Issues 49Application and Practice, 49Final Thoughts 50References 50Establishing the Need for the Technology Project 51Pinning Down the Details: Project Requirements 51Levels of Objectives for Solutions 55The Importance of Specific Objectives 60How Is It All Connected? Linking Evaluation with Needs 60Planning for Measurement and Evaluation 65Final Thoughts 71Collecting Data 73Sources of Data 73Questionnaires and Surveys 75Tests 93Interviews 98Focus Groups 100Observations 101Business Performance Monitoring 104Action Planning and Follow-Up Assignments 107Performance Contracts 116Selecting the Appropriate Method 118Data Tabulation Issue 121Final Thoughts 123References 123Isolating the Effects of Strategic Technology Investments 125Preliminary Issues 125Use of Control Groups 130Trend Line Analysis 135Forecasting Methods 138Participant Estimate of IT's Impact 140Supervisor Estimate of IT's Impact 150Management Estimate of IT's Impact 152Customer Input of IT's Impact 152Expert Estimation of IT's Impact 153Calculating the Impact of Other Factors 153Using the Techniques 154Final Thoughts 155References 156Exposing the Value of Strategic Technology Projects 157Preliminary Issues 157Techniques for Converting Data to Monetary Values 161Converting Output Data to Contribution 162Calculating the Cost of Quality 165Converting Employee Time 166Using Historical Costs 167Using Internal and External Experts' Input 168Using Values from External Databases 169Using Estimates from Participants 169Using Estimates from Supervisors and Managers 170Linking with Other Measures 172Using IT Staff Estimates 174Selecting the Appropriate Technique 174Accuracy and Credibility of Data 175Final Thoughts 179Case Study: Staggering ROI Results for a Successful Customer Relationship Management (CRM) Implementation 180References 182Tabulating Project Costs 183Cost Strategies 183Cost Tracking Issues 188Major Cost Categories 190Cost Accumulation and Estimation 197Final Thoughts 202References 202Calculating the Return 203Basic Issues 203ROI Interpretation 206Case Application 214Other ROI Measures 218Consequences of Not Investing in IT 220ROI, the Profit Center, and EVA 221ROI Issues 223Final Thoughts 229References 230Identifying Intangible Measures 231Key Issues 231Typical Intangible Measures 238Final Thoughts 245References 246ROI Forecasting 247Why Forecast ROI? 247The Tradeoffs of Forecasting 249Forecasting/Estimating Performance Improvement 253Case Example 254Forecasting with a Pilot Project 257Forecasting ROI with Reaction Data 257Forecasting ROI with Knowledge Data 260Forecasting ROI with Skills and Competencies 263Forecasting Guidelines 264Final Thoughts 266References 161Communicating Results 268The Importance of Communication 268Principles of Communicating Results 270Analyzing the Need for Communication 272Planning the Communication 274Selecting the Audience for Communications 277Developing the Information: The Impact Study 280Selecting the Communication Media 283Communicating the Information 289Analyzing Reactions to Communication 296Final Thoughts 297Reference 297Implementing the ROI Methodology 298Overcoming the Resistance to ROI 298Planning the Implementation 300Preparing the IT Staff 312Initiating the ROI Process 316Preparing the Management Team 318Monitoring Progress and Communicating Results 323Cost Saving Approaches 324Final Thoughts 311References 328Appendix 329Index 337
