18-Apr-2018 15:30:00

How to take technology ROI to the next level

How to take your tech ROI to the next level

6 MIN READ

The Tale of Two CIOs - Embracing the Business Imperative with Cloud

The pace of change for the tech leader’s role has increased with digital disruption and the emergence of cloud platforms. It pays dividends to understand how to overcome the challenges facing today’s CIO. In part 3, we look at the imperative to take technology ROI to the next level and discuss business returns - particularly for cloud initiatives.

Read part one and two.

It’s one thing to be on the inside looking at the business – it’s also important to understand how the business views the role of the CIO and your team. Unfortunately, the reputation of the IT group still needs improvement with 35% of respondents of The State of the CIO 2017 survey, saying they are still viewed as service providers and 10% as cost centres.

The way to overcome this is to focus on what’s required to meet business needs. For example, when discussing cloud providers, rather than simply replying on generic opex cost savings as reasons to move to a cloud model, there needs to be a demonstrated business case in terms of measuring real ROI for your business.

Many CIOs start out with business returns in mind – most are focused on technology ROI. For example, you should strive to understand how workforce productivity is enhanced, along with other performance measures.

This means working with your department heads that you may not normally engage with at the start of a project and discuss the real measures that can be compared and contrasted pre and post-implementation of the project. Many of these measures may be guesses, approximations or assumptions.

Discuss with the business stakeholder responsible for each area, agree appropriate assumptions, and have these documented. Also consider running multiple scenarios for Best Case, Probable Case and Worst Case measures.

How can you measure business ROI of technology?

When considering business ROI of technology projects, it’s important to understand that business units (particularly finance) will view it as a cost centre. The IT group can sometimes struggle as they aren’t exposed to the business metrics. While it’s not something that can be done overnight, and must be chipped away at over time, here are some business measures from IdealWare to get started with:

  • Choose a timeline – for subscription items or equipment maintenance contracts, this is typically measured in years.
  • Costs – these can be money, staff time, disruption and frustration, and opportunity cost. Also consider the cost of doing nothing. Include related technology costs such as training, support and the cost of retiring legacy applications or equipment.
  • Benefits – some examples are saving money, increasing productivity, increased or decreased customer satisfaction measures, agility, opening up new markets (estimate their worth to the business and the likely market share you can capture), broader market reach, and other benefits.

Some ROI analysis falls short because it does not fully capture the benefit side of the equation. Think about what your organisation is trying to achieve. Try to also put a dollar amount on that goal in terms of social ROI, for example carbon emission reductions or benefitting employee satisfaction.

Harvard Business Review has some great pointers to include into your business case vocabulary when communicating the benefits of cloud to a CEO.

  • Focus on ‘soft costs’ – this is particularly effective for a CEO that is sceptical about cloud and thinks the status quo is just fine. If your organisation can afford comprehensive software and top IT talent (which will be harder to come by in the future, especially for emerging technologies), then your CEO’s assumption is correct. However, most IT departments are stretched thin. Maintaining everything in-house is difficult, expensive, and time-consuming, especially if your company is trying to repurpose older legacy technology for the modern age.

  • Quantify ‘hard’ costs – on average, only 11% of a company’s IT budget is spent on developing new applications, according to Microsoft; the rest goes to maintenance and infrastructure. That 11% is mainly focused on strategic programs, such as core enterprise systems.

  • Identify where you can make individuals more productive – particularly for mobile workers, that need access to key information to do their jobs. Calculate the upload/download wear and tear on both infrastructure (therefore costs) as well as time multiplied by the entire mobile workforce over a year – this can easily be compared with the cost of making those applications or documents web-accessible.

  • Demonstrate that cloud solutions facilitate collaboration – some of the greatest benefits come from allowing groups and communities to work together in ways that were not previously possible.

  • Data-driven insights – data is the one area where benefits can result in multiples of investment, or shift entire markets and industries. Using data from employees, customers, partners and suppliers can provide a gold mine of opportunity – however it is best to have a few key ‘quick wins’ mapped out to demonstrate the effectiveness of this approach.

  • Speed up application development – Cloud development platforms free up your application developers to focus on writing good cloud, rather than the tasks of buying, configuring and maintaining servers. In addition to building and hosting apps, cloud providers are now making their own software available to customers.

  • In addition to hosting applications, cloud providers are making their own powerful software available to customers that your teams can upload data to and overlay to create powerful third party applications.

There has never been a more exciting – and yet more challenging – time to be a CIO than today. Luckily, there are many options to help the ambitious CIO realise a positive career trajectory, and win the respect and trust of business leaders.

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