Return on investment is how business understands what it’s getting for its effort. This article by Mike Husby expresses some interesting findings from CIOinsight.com: only 46% of companies calculate the ROI of IT projects.
This is odd, as IT is generally something that business consistently indicates is hard to relate to and perhaps even harder to understand in the granular, project-by-project level. So why would business not calculate the return on investment of something that is generally so hard for them to see the value in? The answer, according to Husby, comes down to a few different factors.
Between the traditional understanding of IT as a cost center (hence not measured on performance, necessarily), calculating ROI is fundamentally shifted. However, having an ROI procedure in place for your IT project is a very important element that shouldn’t be overlooked. Husby explains, first, a few reasons ROI isn’t measured in IT currently:
Let’s be honest, if you report back to the senior execs that your decision ended up costing more than it saved, you’re going to have problems. Thus, it is easier to look the other way and assume it all went to plan.
Measuring ROI is expensive; by which we mean dollars and time. Finding the right metrics to measure ROI on IT Projects is difficult. For instance, we do not see a one-to-one relationship between one performance metric and IT. This obstacle is enough to cause a fast paced IT shop to simply ignore ROI all together.
He then goes on to describe ways to establish and define the ROI on IT projects. This includes identifying what ROI looks like within your own company, defining business goals, and defining what impact your project will have on stakeholders.