ROI: More Than a Good Idea
During my years with Exxon, I developed an almost reverent awareness of the difference between "capital" and "expense." The only good thing you could say about expense was that you got to deduct it.During my years with Exxon, I developed an almost reverent awareness of the difference between "capital" and "expense." The only good thing you could say about expense was that you got to deduct it. Capital investment, on the other hand, meant wed found an opportunity to invest in our business at a rate of return that was better than keeping the money in the bank. IT, in particular, needs to be managed as a capital investment opportunity, rather than being merely a money pit of expenseor, as Ronald Reagan once famously said of government, "just like a baby: an enormous appetite at one end and no sense of responsibility at the other."
Oddly enough, its the federal government that has placed itself under a mandate to "develop, as part of the budget process, a process for analyzing, tracking and evaluating the risks and results of all major capital investments made by an executive agency for information systems. The process shall cover the life of each system and shall include explicit criteria for analyzing the projected and actual costs, benefits and risks associated with the investments," commands the Clinger-Cohen Act of 1996 (which you can read at policyworks.gov/policydocs/2.pdf).