ROI is back Featured

6:47am EDT December 18, 2003
In the dot-com era, cost justifications were seen as a hindrance to progress. It was assumed that the benefits of a purchase would always be realized in some magical way, and that an ROI study would only slow the process down.

Things have changed.

Budgets have been slashed and purchasers have been keeping a tight rein on corporate purse strings, even though there continue to be compelling reasons to invest in e-business services and applications.

If you're looking to buy or sell an e-business solution, you need to be able to show justification for the purchase before you make your pitch. For this article, consider a customer self-service solution.

This allows your customers to use the Internet to access certain services you currently provide in other ways. Good self-service offerings usually include at least some of the following features.

* Information: Online product catalog

* Ease of use: Streamlined order entry process

* Information accessibility: The No. 1 customer requested feature

* Availability: Any time via the Internet

* Personal: Flexible for each customer

* Communication: Automatic e-mail notifications

* Global: Multilanguage, multicurrency

* Integration: Direct to back-end system

* Security: Secure, advanced model to conduct transactions

Exploring the benefits

* Strategic benefits. Include ways your e-business application can bring revenue into the company by attracting and retaining customers or creating new sales channels.

* Operational benefits. Demonstrate ways your company can increase profit margins by improving efficiency and lowering costs.

Calculate the value of your strategic benefits in dollar terms, and make modest estimates. For example, your online store may generate a modest 5 percent increase in revenue, but that could be an attractive amount for any company with annual revenue in excess of $1 million.

Add to the dollar amount of your strategic benefits the savings you will see through operational benefits, such as reduced headcount, reduced errors, reduced cycle time and reduced inventory. You should have a pretty compelling argument.

Where's my ROI?

The true cost of, and return on, your e-business investment depends on the type of business you are in and the level of integration you want from your internal systems.

When considering costs, don't forget outlay for software, implementation, customization, training, ongoing annual maintenance, additional bandwidth and the salaries of any additional IT personnel you may need to hire to administer your e-business application.

Now, measure these hard costs against your strategic and operational benefits and you should have a pretty clear view of your e-business ROI.

Add it up

An ROI analysis can be an effective tool to aid the decision-making process, whether you are buying or selling an e-business investment. Further, it is not hard to get started.

Think of today's business challenges and the ways an e-business solution can help solve them. The ROI analysis will validate your decision based on benefits versus cost.

BravePoint has a simple ROI document that can help you pull this information together. Email us at roi@bravepoint.com if you would like a copy.

You'll be surprised at how easily it all adds up. Tom Fricano (tfricano@bravepoint.com) is a director at BravePoint, a supplier of e-business and enterprise IT solutions to mid-market companies. Reach him at (770) 449-9696.