They get requested all the time; a technology ROI model. But how do you build one, what does it tell you, and how are they relevant for technology purchases?
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WHY ARE MANAGERS ALWAYS ASKING FOR THE ROI?
- Businesses, and IT groups, always have more projects than they have budget
- How do they prioritize which projects to work on? Which ones to ignore?
- People higher up don’t understand tech, but they understand finance.
WHY ISN’T ROI EASIER TO CALCULATE? AND DOES ANYONE CARE LATER ON?
- ROI could be about making money, saving money, or reducing risk.
- ROI Basics: Revenues, Costs, Time
- Tech ROI is mostly a scoping activity - what are we including in the calculation?
- Tech ROI could be short-term or long-term.
- Finance Stuff: CAPEX, OPEX, Depreciation, Time-Value-of-Money, IRR, Hurdle Rate
- Good ROI vs. Bad ROI?
- Basics: Build a “Before and After” Model
- Stuff included in ROI calculations: Expected Revenues, Expected Costs (all of them: technology, people, changes, etc.), Cost Savings/Eliminations, Productivity Improvements, Experience Improvements (Assumptions, Storytelling)
- What if the decision-makers aren’t around when the ROI timeline ends?
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