Farrokh Alemi, Ph.D. Return on IT investment
Importance of Return on Investments
Importance of Return on Investments
Importance of Return on Investments
Morgan Stanley: “US firms lost $130 billionin unwanted IT systems” The problem is with our methods Problems are so widespread that it could not be due to mismanagement
List of Costs & Savings • Underestimates affected business processes • Assumes IT increases revenue • Assumes unused buildings have no costs • Training & maintenance costs ignored • Impact on productivity and quality ignored
Proposed Analysis
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI
Investment In DoIT Numerous units were merged into DoIT in this time period. DoIT organization defined based on 2002 operation and budget reconstructed.
IT Investment & University Revenue
Example: Evaluation of DoIT The Division of Instructional & Technology Support Services includes: • Audio Visual Services • Academic Computing Labs, • Electronic Classrooms, • GMU-TV, • Instructional Resource Center, • Johnson Center Technology • Student Technology Assistance Resource Center. A key service provided by DoIT is the WebCT course delivery system
Possible Sequence of Events
Possible Sequence of Events
Possible Sequence of Events
Correlations
Possible Sequence of Events
Conclusion of Analysis
Objective Analysis of ROI Take Home Lesson