The importance of ROI analysis
While the world of business technology continues to evolve and mature at a rapid pace, one constant remains: a return on investment is the single best measure of the success of your technology spend. Just how important is this measure of ROI, and are you including the right metrics in your analysis?
Why do you even need to measure?
In a Forrester poll of 825 IT decision makers, 93 percent of them agree that conducting a business case for technology investments is either very important or somewhat important.
Think you don’t need a business case justification? Even if you are not in the position of needing to convince decision-makers of the soundness of your decision – it makes inherent business sense to make smart investments that support your organization’s needs and objectives.
Your business case won’t end with the decision to implement a new cloud ERP solution, it should continue long enough post-implementation to accurately and definitively measure the solution’s value.
Are you measuring the right things?
Traditional return on investment (ROI) business case justifications tend to focus exclusively on the IT and business impacts of the proposed technology. What’s missing from this formula are the various risks and uncertainties, as well as the potential strategic impacts, such as scalability and flexibility. In response, Forrester has developed an ROI framework it calls the Total Economic Impact, or TEI.
Weighing a solution’s benefits, costs, and flexibility against its risks combine to equal the solution’s TEI.
Total Economic Impact Involves:
- Quantifying benefits
- Capturing costs
- Evaluating flexibility*
- Adjusting for risk*
*Often overlooked in traditional ROI business case analyses.
ROI – the universal measurement
ROI remains the universal measurement for all kinds of investments, including the investment in a new business management solution. It’s vitally important to get an understanding of the ROI of cloud ERP investments, given their mission-critical role in the organization.
In the course of your analysis, be sure to include more than the solution’s costs and benefits – make certain you are looking at the Total Economic Impact.