Table of Contents
Introduction to technology ROI
The formula for ROI calculation is pretty simple: ROI = net gain/cost.
But truly understanding the net gain and cost of technology investments is often much more complicated. As the footprint of connected devices continues to grow, and organizations leverage new technologies, both the benefits and costs can get lost in the chaos.
To continue driving digital transformation, IT leaders need a clear picture of their spending across the organization so they can tie investments back to the value they provide.
Benefits of technology investments
It’s no surprise that technology investments are critical to modern organizations. While the niche use cases for many technologies are industry-specific, like connected devices for hospital beds or tablets to drive security on construction sites, the benefits are widespread:
- Save money through optimizations
- Automate manual tasks
- Securely manage data
- Grow revenue streams
And with 5G, the IoT, AR/VR, and more on the horizon, the list of benefits will only continue to grow.
Determining net gain and the true cost
The first step in calculating ROI is understanding what the net gain and true cost of their investments are. As IT spending continues to increase, getting the approved budget from finance teams remains a challenge. You need visibility across all IT categories in order to tie spending back to projects and departments to determine the true cost across the organization.
By having quantifiable data, IT leaders can justify increased IT budget requests. Deploying a technology expense management solution can help provide insight into spending at a granular level.
Once you identify the true cost, you can answer the following questions to help determine the net gain.
ROI analysis questions
- What challenges are we solving with this new technology?
- What is the outcome we are trying to achieve?
- How does this technology drive results?
- What KPIs will determine success?
The truth is that understanding the true value of a given technology relies entirely on your specific use case. You must consider how the technology will impact your business, employees, customers, and end-users. When you have this understanding, you can then make a strategic decision that will drive a positive ROI.
IT ROI Tips
#1 – Determine the impact on the business
IT leaders who want the biggest return on investment must first identify the business impact of technology initiatives. Organizations should look to create an IT culture that puts the business first.
From investments that drive revenue to those that support service delivery, IT leaders need to understand what the end goal is. Sometimes ROI is easier to determine. For instance, projects that drive revenue, such as creating and deploying applications to enable sales.
And don’t forget critical hardware upgrades like network transformations.
#2 – Communicate the numbers of the business
Collaborating with the appropriate business leaders across the organization is key here. IT cannot determine ROI entirely on its own. By working with leaders across various business units, and combining their input with a detailed cost analysis, you will have a clear understanding the overall value add of your technology investments.
So when finance asks difficult questions like “which region is spending the most on IT?” or “at this location, which assets do we own and how many contracts are active?” you will be able to clearly communicate the numbers of the business.
#3 – Develop useful KPIs
Strategic IT finance planning needs KPIs that support the business strategy. These aren’t simply operational measures, they are proof points that IT is delivering value across the entire organization. A few key categories are:
- IT plan vs. spend
- IT spend by business unit.
- % of IT investment by business initiative
- % of IT investment on running vs. growing the business
- % of spend on customer-facing innovation
- Infrastructure technology costs
- Application and service costs
- End-user and customer satisfaction scores
- % of projects on time and on budget
- % of services meeting SLAs.
#4 – Leverage subject matter experts
Many organizations look to TEM solutions to help manage telecom and mobile expenses. IT leaders should lean on trusted vendors and other external consultants to help identify anticipated and realized returns. Often, vendors have a deep niche understanding that can help point to potential benefits.
Inc recently posted an article on how brightfin is helping carve out a niche in the crowded TEM market:
“You can also offer the best ROI to your customers by identifying where they lose money within your market and becoming the cost-saving solution. For example, by identifying that customers lose a lot of money on IT expenses, software-as-a-service (SaaS) company brightfin built a niche in the crowded market of technology expense management. Their business model is tied directly to customer savings– the platform integrates (a double whammy with that previous point) with ServiceNow to optimize mobile, telecom, and cloud invoices creating a clear picture of a company’s IT spend instead of data fragments across systems.”
Check out the full article here.
