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IT investments are increasingly strategic in today's business world. Less ambitious, targeted investments are being made by more and more successful companies. Leaders are demanding quantifiable benefits to the business from these investments. They also want to know the business impact in relation to investments in other strategic parts of the business, such as distribution, manufacturing, and sales and marketing.
Technology must prove its effectiveness and profitability before a calculated investment can be made. But determining the financial return when it comes to IT investments isn't always an easy thing to do.This has created a need for a more refined approach to IT investment - an evaluation framework that can identify and quantify the payoffs from IT across functions, departments and the value chain over a period of time.
How Do We "Track" ROI
Return-On-Investment (ROI) Monitoring is a framework to help businesses analyze and optimize the economic performance of IT investments, and allocate "justifiable" resources and capital for IT projects. The core premise of this framework is that it is "business centric" and drives to align business priorities and IT investments.
ROI Monitoring starts with understanding the business and ends with the financial metrics. Each step is articulated in the language of the business, so business executives clearly understand the tangible impact of the IT initiatives and gain a greater understanding and appreciation for the strategic implications of IT investment.
How is ROI Monitoring Used?
ROI Monitoring employs the following five logical steps to derive business value. Cequin is attempting to "raise the awareness" of IT possibilities throughout your business. We have conducted a survey analysis to get a picture of your technology strategy and investments to date. We believe you have built an extraordinary company. We know you hold a powerful position from which to launch the right initiatives.
Step 1: Understand the BusinessValue, like beauty, is "in the eye of the beholder," which is why the business and IT team members are in need of a clear map to achieve a common perspective of what really drives the business and its investments. Cequin offers a business assessment roadmap for technology that identifies the key stakeholders, their critical success factors, the strategy to achieve them, and the key performance indicators that determine success.
Step 2: Understand the SolutionsNext, the project team will work with the owners of the key business processes using flow charts, industry experience, and process analysis to identify ways of applying technology solutions to insure alignment with the organization's critical success factors.
Step 3: Understand the Benefit/Cost EquationOur approach supercedes the simple itemized list of IT budget owners' benefits traditionally found under the Total Cost of Ownership (TCO) umbrella. Benefits can be expressed in many ways, but they often fail to communicate in the language used by the business decision makers.
In order to communicate effectively, Cequin works with your team to identify ways that business decision makers can evaluate IT scenarios in terms of business value. The priorities you set for your business and the strengths you have developed over the years should shape an IT strategy to make it unique. The same IT solution implemented in different situations creates very distinct returns on the company's investment that are only discovered through a careful inventory of company business processes.
Finally, the team will quantify benefits. Benefits may be expressed in many ways, but the key is expressing them in terms that match the needs of the business, and evaluate the total cost to achieve those benefits.
Step 4: Understand the RisksMany IT projects successfully build an economic justification identifying benefits and costs, but then fail to live up to the expectations of senior management or stakeholders. Accurately profiling potential risks of an IT investment can help avoid pitfalls by identifying various forms of risk, developing risk mitigation solutions, and adjusting the estimates of benefits and costs accordingly.
Step 5: Understand the Financial MetricsFinally, the team financially projects the impact of the proposed technology in terms familiar to your company to present the business case for any investment.