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Showing posts from November, 2006

Does the Vista view include ROI?

With the official release of Microsoft Vista many corporations will be getting requests to upgrade, and puzzling over whether it makes fiscal sense. The major question to be answered: Does Vista derive enough savings to make the case for near-term migration, or should the organization take a wait-and-see approach?

Frugal CIOs and CFOs want to understand how investing in the upgrade will yield immediate and direct benefits – particularly how it will help reduce IT costs, while at the same time improving user productivity, service levels and capability. With the most frugal buyers in mind, let us first look only at the direct impacts of implementing Vista – how the Vista investment can help lower ongoing IT costs.

Looking at the costs of PC ownership, IT labor for desktop management and support is the largest IT expense, consuming almost 60% of the total lifecycle costs. PC support and administration costs on average one FTE for every 100-200 PCs, with an estimated 8 to 12 service desk c…

Although it’s not time to Party Like its 1999, There is Plenty to Celebrate

IT spending has experienced a healthy three years of budget increases since the beginning of 2004, giving many IT execs plenty of reasons to celebrate. Annual growths in 2006 is expected to top 6%, and although projections for 2007 show a more conservative sentiment, spending increases are likely to continue with consensus estimates of 5% to 6% expected according to IDC and Forrester Research. This is far cry from the double digit annual increases of the dot-com era, so while it’s not time to party like its 1999, it is good news for IT stakeholders. With the New Year upon us, it is a great time to take stock of these IT spending trends and determine what impact they will have if any on 2007 plans.

Examining IT spending and effectiveness metrics on 21,000 companies in 37 different industry segments worldwide. , the results show that there are several significant findings to examine in relation to your own budgeting process, including:
1) Innovation spending is up sharply by 43% since 2…

Business Value Selling and Sales Turnover - Continuous Working for Change

Many IT solution providers have recognized that selling the old way based on features, function and price just won’t cut it in today’s marketplace. The age of budget scrutiny, governance and accountability are upon us. As a result, customers are demanding business value proof prior to investing in that next upgrade or project. The statistics bear this out, with over 90% of customers requiring formal business justification on projects $50,000 and higher according to our research.

These same customers, even though they require formal justification, admit that they don’t have the time or resources to properly prepare business cases for all of the pitches and proposals they get, and as a result, many never get the fair consideration they deserve. Many fully expect vendors step up with their own justification. Vendor analysis is so important that over 61% rate a vendor’s ability to deliver an ROI business case justification as an important differentiator or requirement in the selection pro…

Is Return on Customer (ROC) a good business value metric?

Return on Customer (ROC) is a Pepper’s and Rogers twist on normal return on investment (ROI) analysis to help companies quantify the returns from various marketing and CRM initiatives. I believe that in ROC, the guru’s of new ways to think about customer relationship management are on to something.

Too often we see company’s focusing their investments on quick payback periods – implementing projects and initiatives that in the short term may tyield a quick ROI –saving the company money or driving short term sales – but in the long run yield strategic issues. Return on Customer is a specific measure to help companies overcome two issues we have seen with CRM business cases:

 focus their CRM initiatives and the entire company on what counts most – the customer – versus saving money or optimizing resources

 balance short term gains versus longer term impacts of CRM programs – getting the organization to think not about the quarter by quarter financials, instead, thinking more for the lo…

How important is improving data management/data architecture processes before implementing CRM in order to achieve better ROI in a faster timeframe?

In a nutshell, the CRM system will use a large amount of information regarding prospects, leads customers, and orders, and create a large amount of data as various activities are entered and logged. Data integrity is essential.

Without a good data architecture and integrity plan – what data is to be collected and integrated and how it is going to be used – the CRM solution may not prove as useful as possible, may prove unreliable, or may undergo overhauls midstream. It is important that a data management / data architecture be developed prior to CRM implementation and deployment in order to support the business goals, drive a customer centric implementation, and deliver a more reliable return on CRM investment.

What is the best time-frame to use for CRM ROI?

The longer you have to wait for benefits, the more risky the project is.

As a rule of thumb, projects which take more than 12 months to achieve payback – where the cumulative benefits exceed the costs – is typical, even on CRM projects. Any project where the payback is more than 24 months out, I would suggest the team break into smaller, less ambitious projects – where the investment is smaller, and the initial benefits acheivements can help to pay for next round of investments.

On any project you should expect to see some immediate benefits in the first couple of months after deployment, and use. Waiting until after the users are trained and begin using the system is required, but soon after some of the hard (direct) benefits should be apparent and quantifiable. If the project is not showing some quantifiable improvements in key performance indicators after training and adoption begins the project team should regroup to discuss why and try to remedy the situation. Measuring these cons…

ROI Calculators - do they work and are they credible?

ROI Calculators are typically used on vendor websites to provide a tool where visiting prospects can quickly determine whether the vendor’s solutions can provide quantifiable value. Typically the calculators have a few questions in order to get an idea about the prospects business and opportunities from improvement. Using direct research results or estimates, the tools can simulate the impact of the solutions and quantify the potential benefits, costs and ROI (ROI = net benefits / costs).

For users of these calculators, they can provide a quick idea as to what savings could be achieved, particularly those calculators which let the user delve deeper and change all assumptions and defaults (not black box with magic results that always come out positive), and those which are supported by direct research as to the benefits achieved by other customers.

These calculators have proven valuable as landing pages for direct marketing campaigns and for educating and capturing leads. The results are…

Hard and Soft ROI - The differences and quantification

Hard and soft ROI usually refers more specifically to various benefits which can be included and used in an ROI analysis. The hard benefits are also called direct benefits as they are typically directly tied to the impact of implementing the proposed solution – a first order, cause and effect. Some examples of direct (hard) benefits are:

1. Consolidating existing system and avoiding having to continue to pay support contracts on the replaced assets
2. Automating a specific tasks and eliminating the manual effort
3. Moving the task from a highly skilled expensive resource to less expensive resources

The direct benefits are often easy to quantify, and as such there is usually little risk in considering 100% of the expected cost avoidance or productivity improvements in the ROI calculation (ROI = net benefits / cost).

Soft benefits are less easy to quantify and rely on in a business case. Soft benefits are often referred to as indirect, because they rely on a number of steps in order for the …

The ROI of RFID in the Supply Chain

Although RFID implementations are not without costs and risks, a number of companies in manufacturing, warehousing and distribution and retailing have achieved a 200-percent return on investment.

Many organizations that produce, distribute, handle or sell goods are researching what RFID can do to improve operating efficiency, reduce business risk and drive additional revenue opportunities. According to our research these early RFID projects could cut supply chain costs by 3 to 5 percent and achieve a 2 to 7 percent increase in revenue, thanks to the better visibility and accuracy RFID provides.

Alinean studies show that on average, more than 90 percent of projects require a formal business case justification in order to gain approval. For an organization considering RFID projects that might require significant up-front investment, how can these general early adopter guidelines and case studies be used to ensure that individual programs generate positive business benefits and a tangible …

Seven Steps to a Highly Successful Budget Presentation: Proving Past Success

IT spending is expected to grow again for the third straight year, with average 5-8% increases expected again for 2007. As a result, the IT budgeting process should be easier than in years past. Corporations have cash to spend, and for some businesses such as finance, technology, professional services, retail and others where IT is an essential component of competitive advantage getting executives to invest more in IT will be easier than ever. But this certainly does not mean that CIOs will get what they want and that the process will be easy.

Budget growth likely consumed by infrastructure requirements

This year security and business resilience spending needs to be increased once again in light of increasing frequency and severity of threats, and renewed awareness as to the impact of disasters on the business. Infrastructure upgrades are still sorely needed in many organizations where technology refreshes have been delayed to help reduce costs. Corporate and IT compliance programs req…

CIOs are from Mars, CFOs are from Venus:

For 2006 the number one business priority for CIOs was surveyed to be business process improvement – implementing technology to help the business become more streamlined and easier to do business with.[1]. To help accomplish these elusive priorities, IT organizations are reorganizing by hiring one or more business / financial experts as key members of the IT executive team. These resources are hired to help provide a catalyst for change, and implement a singular focus on business process alignment and value management within the IT organization.

Often these resources are called IT CFOs, IT Finance Controller, IT Investment/Finance Managers or IT Value Management Officer. Many Cx level executives think that these business savvy managers hold the key to achieving the elusive silver bullet for improving the ROI from IT. Unlike most IT managers and executives, these financial experts haven’t worked their way up the IT organization with their technical and project management skills.

These n…

TCA Champ - Oracle or Microsoft SQL Server?

As platforms continue to evolve in the technology industry, a central concern for IT executives is implementing the right systems to maximize the return on each investment. Since labor costs and equivalent outsourced services dominate most IT budgets -- over 56% of IT spending on average -- selecting platforms with lower implementation and ongoing management costs can significantly improve overall IT efficiency. More importantly, since innovation is only 10% of the typical IT budget today, reducing ongoing management costs can help reallocate precious resources and budgets to more innovative tasks and projects – delivering true business value.
One of the most important infrastructure investments is a database platform. Two of the leading choices are Microsoft SQL 2005 and Oracle Database 10g. So, for those seeking to reduce overall costs and reallocate labor investments to more innovative tasks the obvious question is, "Which has the lower total cost of administration (TCA)?"…

Can Sarbanes-Oxley compliance generate any business ROI?

Sarbanes-Oxley (SOX) section 404 compliance requires companies to implement extensive internal controls and documentation. Many companies did not have sufficient control in place to comply when SOX was passed, so investments have been made in systems, personnel and auditing to assure compliance.

In order to achieve a positive ROI, the SOX compliance must have net benefits that exceed the investment to achieve compliance. These benefits cannot be the compliance itself – ie. Avoiding fines and litigation, but they must be the rewards of compliance itself.

While implementing SOX some companies seek not merely to comply, but use the regulations as a catalyst to overhaul their controls programs. These companies examine key financial and management processes, and improve these processes in order to:

1. Streamline the process steps by automating key data collection and entry or transaction recording processes

2. Avoid costly process errors, such as reducing accounting or billing errors3. Reduce …

Time Frame for Measuring CRM ROI?

The time frame for measuring ROI (ROI = net benefits of a project / total project investment) has traditionally been anywhere between three years and five years for typical IT projects, with rare instances of seven to 10-year analyses for investments with large capital outlays such as extensive ERP-reengineering initiatives.

Because typical projects have most of the costs up-front and rely on benefit projections over time, the benefits in outgoing years work to offset the initial cost. Visibility in near term costs is often very clear, while benefits in outgoing years becomes progressively fuzzy year over year – thus the risk that benefits are overstated and accumulate in error over longer periods of time – making a marginal investment seem much better during the planning stages if the time horizon is too long for the analysis. S

horter time horizon analysis are less risky because market conditions, competitive influences and company conditions are easier to predict in the nearer term, …