The ROI Mirage

The search is on for valid return-on-investment information. Study new metrics before you begin the journey.

Gauging the return on investment (ROI) on technology used to be a straightforward matter. New IT investments were seen as operating expenses. Generally, their value was measured by the extent to which they reduced operating costs.

No longer. E-business and other new technologies such as CRM have added all sorts of variations and complexities to the traditional ROI benchmarks. No longer is IT looked at as simply a means of economizing through cost efficiencies. It has, of course, been totally integrated into the business.

Meanwhile, the CIOs, CXOs, and the like who purchase IT are increasingly under pressure to show that they can capture a measurable payback on their big-ticket technology investments, and theyre insisting that their IT consultants, integrators and solutions providers provide such measures as they made recently. That, at best, is a tricky business.

Say youre dealing with CRM. What can you tell your clients they can use to calibrate ROI? Customer satisfaction? Market share? Customer retention? Account aggregation? All of the above? Finding valid ROI benchmarks has become so difficult that theres now a cottage industry of ROI consultants and ROI-evaluation tool vendors—among them, Gartner, Comdisco, and many of the top-tier consultancies—that work with clients in helping them determine if theyre getting real value for their technology dollars.

In the volatile dynamics of business today, even some of the ROI metrics that were created specifically to benchmark the benefits of online business no longer hold up. E-tailers initially focused exclusively on such metrics as click-throughs, page hits and lengths of stay. Market share was the mantra of the day. Now, the thinking is retailers that dont factor in the off-line impact—and overall profits—of the Web are being myopic.

In the past few months both Forrester and Jupiter Media Metrix have issued reports indicating that business must incorporate off-line metrics to arrive at a valid means of assessing the returns on their Web investments.

Establishing those metrics is doable by factoring in such elements as increased store traffic and boosting margins through customer self-service over the Internet. But how can businesses realistically measure the ROI on integrated e-business initiatives built around a complex set of relationships that includes distributors, supply chain partners, channel partners, etc. Theres simply no universal measurement thats applicable here, which means that businesses—and the IT consultants they work with—have to look beyond numbers and tailor ROI measures to their individual situations. Otherwise, measuring real payoff on IT will remain as elusive as a mirage.