If a company’s management team isn’t asleep at the wheel (and a disturbing number are), they will be looking at what they are getting in return for the money they spend. For example, if you sink $100 million into R&D, you want to know that the products or services that come out of that research will generate much more than the money you spent. Simple, right?
But there is a trend in management to avoid the accountability that comes with calculating Return On Investment. Marketing departments try to avoid it because they tend to engage in “brand” marketing (which is difficult to calculate ROI for without Big Data) instead of “direct” marketing. HR departments don’t want to be held accountable because most of what they do is…let’s face it, what a school teacher would call “busy work”. How are you going to calculate a return for the company’s umpteenth diversity training?
I’ve seen a number of articles lately which encourage the same path for us. IT is a utility, they say, and is simply a cost of doing business. You can’t measure ROI, you just have to accept that it is a necessary evil and minimize the amount you spend while still being able to conduct business.
I think they’re wrong.
If you want to get out of the downward spiral of shrinking budgets and greater demands, you have to be able to show your peers and superiors that there will be a substantial return on the money spent. If a new Big Data system will result in an annual savings of 20% because it optimizes the global supply chain, that’s ROI. Take the savings over five years, the TCO of the system over five years, and there’s your number.
There are plenty of examples of this, but since CIOs don’t usually “own” the metrics involved (like supply chain savings or revenue increases), taking credit can be difficult. Search these out and don’t be shy when it comes to recognizing your contribution. Remember, when there’s a sizable ROI involved, cost almost doesn’t matter.