Tempo Services's Musker insists whoever puts the business case together, the person making the claims for ROI must always be somebody who is trusted by the business, which generally means they should come from the business. "It must be the business themselves who make that description, or make the determination and recommendation. If it comes from IT, nobody believes it," he says.

RACQ's Rice says it also helps to have IT sit fairly high up in the organizational structure, reporting through to the CEO and even the board, because that enhanced visibility on issues on IT security gives you a jump start when you are starting to talk about needing to spend money.

Meanwhile, when Cutter publisher Coburn was asked at the May 2004 conference whether IT as a whole had made any progress in the area of ROI, she replied in the affirmative. "I said feature-driven development and iterative development and collaborative development - where the users are viewing features throughout the development and team members include users and executive sponsors, and there's an understanding that user requirements change over time - I think those are all making a difference in the value of the projects that are delivered.

"So maybe, regardless of what the ROI calculations show, there is a real return on investment," she says.

ROI Crystal Ball

There is a way to see if your new software project will have good ROI without having to crunch all the numbers. Use these tests.

Breadth The more people using the application, the better.

Complexity Software that automates difficult, expensive work is good.

Importance If the work affected by the software isn't critical it won't net as much value.

Collaboration Software that gets people talking is more valuable.

Reuse Using the knowledge generated by the software over again makes good business sense.

SOURCES: NUCLEUS RESEARCH AND DELPHI CONSULTING GROUP

SIDEBAR: By Any Measure

Seven tips to see if your ROI method measures up

Better ROI analysis doesn't just involve process, it requires more involvement and accountability from businesspeople. Right now, the process is ghettoized within IT, which is least qualified to predict how changes in the ways people work will translate to the bottom line. Instead of divorcing themselves from any responsibility once the project gets under way, businesspeople need to be involved up front during ROI benefits analysis and be willingly accountable along with IT for achieving the predicted benefits. That teamwork could save millions down the road when the software is installed and it comes time to make the hard business decisions about cutting head count and reassigning people.

Here are some tips on how to create a new, repeatable, accurate ROI process.

1. Create a list of strategic business metrics that can be applied to the ROI process for all software projects.

What are the most important strategic benefits that the business likes to see for its investment dollars? A short list, including some or all of the points below, will give crucial guidance to ROI analysis efforts around the company.

• Improved operational efficiencies (such as reduced head count, increased productivity, or a reduction in the number of applications, hardware and support staff)

• Increased customer satisfaction

• Improved market competitiveness.

2.Bring IT and finance together to jointly develop a single ROI methodology for the company and then keep finance involved.

Discussions with finance superiors about IT projects can be more like ongoing confrontations. Finance doesn't just challenge ROI numbers, it battles every facet of the methodology for arriving at those numbers. Consider this, if you fight the methodology battle only once, it would make more productive use of everyone's time. Try pairing one of your best IT project managers with the director of financial planning to create a standard method for calculating ROI. If you develop the methodology in finance's terms, you'll have them pulling IT projects through the ROI keyhole rather than you having to push them through all the time.

It's also possible to go a step further. Assign a finance person to each IT project to track the progress of benefits during and after the project. It allows IT to disown - or at least jointly own - the ROI numbers with the business. IT has more credibility when the controller organization is the one saying there will be millions of dollars saved instead of the CIO.