Risks to ROI

Back in the days when software projects were small and limited to specific areas of the company, the effect of a bad ROI process would have been negligible. But now that software projects can cost hundreds of millions of dollars and involve every facet of a company's operations, the consequences of faulty ROI calculations can be catastrophic.

New Technology The lean, mean Internet has made application obsolescence occur faster than ever. Beware of technology projects that don't offer ROI for a long time.

Mergers and Acquisitions If you tend to grow through M&A, don't approve projects with long payback periods. You'll have to start over before you finish.

Underestimating Training Costs Nothing ruins ROI faster than employees who don't use the application as it was intended because they don't understand it. Be sure your implementation team doesn't take all your application knowledge with it when it leaves at the end of a project. You need "superusers" who helped install the application and can train others to use it.

Unfinished Business Processe Leaving business process redesign for the implementation phase instead of hashing it out during the ROI phase will hurt expected productivity returns.

Bad Cultural Fit If you have a tightly controlled bureaucratic organization that doesn't share information willingly, don't expect your employees to give you ROI on collaboration software like Lotus Notes. Similarly, a global organization whose applications speak only in English and US dollars will have a lower ROI.

Employee Benefit What about me? Software usage rises in direct proportion to its ability to give the employee an advantage in his or her career. If there is no personal benefit component to the new software, employees won't want to use it, reducing ROI.

ROI Calculators

Need to make a business case for a big IT investment? These spreadsheet-based workbooks, developed by ROI consultancy Nucleus Research, will help you calculate the bottom-line value of ERP, supply chain, storage management and other IT projects. Plug in your data, and these workbooks do the maths! You can calculate the following: return on investment (ROI), total cost of ownership (TCO), payback period and net present value (NPV).

You'll even get a risk assessment for the IT project. Just enter your cost data and identify what you think the benefits will be. You can print out a detailed report of the financial results - including graphics - to show the boss.

The Nucleus Research ROI tools (as zip files) include:

• Standard ROI Tool

• Integration ROI Tool

• ERP ROI Tool

• Supply Chain ROI Tool

• Storage ROI Tool

You can download the tools at www.computerworld.com/managementtopics/roi/story/0,10801,89919,00.html.

If you'd like more information on how to use these spreadsheets, Nucleus Research offered Computerworld readers its ROI methodology and tool training CD for a $US35 fee back in July. And because this offer is still up on US Computerworld's Web site with no caveats as to expiry dates, head to NucleusResearch.com/request_training_cd.php and order yours. [I checked it out at press time. - Ed]