Rethinking ROI: How IT value measures up
In the world of IT, ROI is king. But should it be? How many approved IT projects have you seen with projected returns that -- in spite of the vetted calculations -- you just didn't believe? And how many projects that were rejected because ROI couldn't be calculated or proved, would have turned your company into a well-oiled machine? ROI can be a great tool, but it's not the only mechanism for judging value.
Let's look at some situations that arise when managing information technology and see how well ROI works in each instance.
The Broad View of IT Value
"Information Technology" -- both the technology itself and the department or team organized to apply it -- is a means to achieve business objectives. Its value is derived from how well it achieves this objective. (Figure 1 illustrates how IT value is achieved.)
Achieving business objectives is a long-term matter if they’ve been set appropriately, and continuous progress towards the objectives often takes the cumulative effect of many projects.
Where is ROI in this picture? If it exists at all, it’s in a project. (It may not exist for some projects, such as foundation infrastructure or technology platform work, for example).
So what's the value of IT? It's in the achievement of its financial and customer benefit objectives (increased usability and use in foreign countries, in this example), and it's in the indirect achievement of the business objectives (increased international revenue). It's not in the ROI calculation of any one project (extend applications to Spanish)
ROI may be illustrative, but it's not a measure of IT value.
Sign up for ITworld's Daily newsletter
Follow ITworld on Twitter @IT_world
On Twitter now
management
Powered by Twitter
jfruh
Apple syncing patent can't come soon enough
pasmith
New Twitter features borrow from 3rd party clients
Esther Schindler
Open Source Changes the Software Acquisition Process
mikelgan
How to set up continuous podcast play on the new iTunes
David Strom
Five important Windows 7 mobility features
sjvn
Guard your Wi-Fi for your own sake
Sandra Henry-Stocker
Grepping on Whole Words
Sidekick: The Good News & the Bad News
Either way you look at it Microsoft Data Center management did not follow standards or best practices in this failure. In which case it makes me wonder more about the outsourcing of corporate data much less personal data.
- mburton325
Join the conversation here
Quick, practical advice for IT pros. Made fresh daily.
Want to cash in on your IT savvy? Send your tip to tips@itworld.com. If we post it, we'll send you a $25 Amazon e-gift card.













Steve's a true thoughtleader
Steve's a true thoughtleader and this article proves it. Throughout my many years working with him, he always comes up with concepts that business needs to think hard about!