Determining the Value of IT

The newest, fastest, most advanced technologies are always tempting you with promises of more productivity, more efficiency and increased cost savings.  The rehearsed sales pitch and glossy charts can certainly be convincing.  At the end of the day, though, when it's your business and your money on the line, you need to make sure an IT project is going to truly be good for your bottom line.  This is not always easy to determine, especially when it comes to IT investments.

Initial fixed costs & operating overhead are the easy estimate, yet they don't measure the potential to revolutionize your business that the right IT investment can have.  It's the intangible benefits, the hard to measure affects, that require the right training and experience to best quantify.  Maybe your new investment will cut your production costs, but what will be the affect on your ability to respond to new market opportunities.  Maybe you have an opportunity to cut personnel costs, but how will that impact employee morale and customer service.

A combination of some or all of the following steps, conducted by a properly trained and experienced IT professional, will ensure your decision is the right one for the future growth and prosperity of your company .

Cost / Benefit Analysis

You can probably do a cost / benefit analysis in your sleep by now, but it's important to consider the unique characteristics of doing so for an IT project.  Your development and operating costs may seem straight forward but this is a key area where IT projects can get out of hand and lose momentum.  A realistic estimate of your personnel costs, specifically in regards to time spent developing and training, is vital.  And, while the tangible benefits can seem readily apparent, the intangible benefits are harder to discern.  How does your new investment position you for future growth?  How will it affect your ability to manage your employees or maintain your customer relationships?  Does this change your position as a market leader / follower?

Payback Analysis

This tool will estimate just how long it will take to for your to recoup your investment, but it will also put into focus whether you have other projects that would be a more valuable allocation of your capital.  Just because a project will eventually return an initial investment does not mean it is a good investment.

Return on Investment

This always seems to be the key metric when it comes to IT projects, as it should be.  Simply put, you take your estimated profit from the investment divided by your estimated costs.  The percentage or ratio is your ROI, and the higher the better, and this is especially useful when considering multiple investment options.  Sounds simple enough, yet just like the other metrics mentioned, an accurate estimate of both profits and costs is not easy to produce.  While the pitfalls of estimating costs have been mentioned above, it is the estimating of profits where experience is key.

Proper training and industry experience is invaluable when judging the value of IT investments.  We have the experience and knowledge necessary to help you make the best decision for your business.  A small investment in expertise now can lead to the right decision and significant savings and profit later.  Let us know if we should be working together on your next IT project.