Delivering Business Value

Application ROI

Calculating ROI for any application is difficult. If the application automates labor-intensive activities and reduces staff/costs for the business, it is easier. It is much more difficult to calculate ROI for applications that provide intangible benefits such as regulatory or quality control capabilities where you have to consider the cost of non-compliance. At the very least, the total cost of ownership should be calculated to include development/integration, operations and support costs and compare that to the estimated cost of performing the activity manually. You must also consider that some applications result in a net staff/cost increase because people are hired to input data and support the application.

When existing applications are consolidated, benefits and TCO should be calculated for the consolidated application.  Then you can compare against the indiividual costs/benefits prior to the consolidation.

Calculating ROI is impossible if an IT organization is not accurately tracking support and development costs and the business is not tracking the cost/value of the benefits obtained by the application. You can’t manage what you don’t measure.

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