Why ROI & TCO Stink as Measures of System Value

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Webinar Sponsored by Computer Aid, Inc.

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July 16, 2014, 10:30am

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Steve WeissmanMinister of Process & Information BettermentHolly Groupsteve@hollygroup.com

Hosted by:

Jessica SnyderITMPIJessica_Snyder@compaid.com

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• Provides expert consulting and professional training on process and information betterment– pragmatic best practices for strategy and policy development,

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– driving the receipt of Maximum Total Value® from your information and information technology

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Why ROI & TCO Stink as Measures of System Value

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Let’s Start at the Very Beginning

The Use of Return on Investment (ROI)in the Performance Measurement and Evaluationof Information SystemsToronto, Ontario, CanadaMarch 11, 2011

Peter AndruAlexei Botchkarev

The Use of Return on Investment in the Performance Measurement and Evaluation of Information SystemsPeter Andru and Alexei Botchkarev

Toronto, Ontario, CanadaMarch 11, 2011

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Let’s Start at the Very Beginning

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So What’s the Catch?

Strategically Short-Lived» Dominate initial discussions but rarely reviewed after

system selection

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Strategically Short-LivedOff the Mark

» “Return on Investment” generally focused on a single point in time (i.e., payback) despite solution lifespans of many years

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Strategically Short-LivedOff the Mark

» “Total Cost of Ownership” suggests spending is finite when expenses are incurred each and every year of service

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Strategically Short-LivedOff the MarkIncomplete

» ROI and TCO address economics only

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There’s More to Value Than Just Money

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Your Objectives

… and work better together

To work better …

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On the Road to Maximum Total Value®

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MoreValue

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MoreValue

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Hey, Don’t Just Take My Word for It

“I wish I had thought of this when I started, but I can’t go back and start again.”

– CIO of a major athletic shoe manufacturer

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What is “Value”?

“Relative Worth, Utility, or Importance”¹ » Notice that money is not the object

¹ Merriam-Webster

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The Value Disconnect

EconomicsProcess ChangeCollaboration

Required for justification but irrelevant to implementation success

Irrelevant to justification but critical to implementation success

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Value: It’s What’s for Dinner

You May Be Implementing for ‘Compliance’» To heed new regulations or assuage your legal

department

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Value: It’s What’s for Dinner

You May Be Implementing for ‘Compliance’But You’ll Be Grilled On Value

» To justify the financial and human resources you’ll expend

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Impediments to Value

Under Pressure, Over Spent» Schedules and budgets as measures of “behindness”

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Impediments to Value

Governance, Social, and Mobile Initiatives» Nothing like trying to do it all,

and to do it all at once!

No wonder a CIO’s average tenure is only 18 months!

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Politics

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Baggage

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Religion

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People

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“It’s Psychology, Not Technology”

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Change Management = Parenting

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“Put a coat on”“Prioritize value”?

Getting People To Do Things They Don’t Want to Do But You Know is Good for Them

“Clean your room”“Eat your vegetables”

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Now Back to Our Regularly Scheduled Program

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Economics

ROI» Investment» Return

TCO» Costs

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Economics

CapitalLaborSupport

Return

Dollars

Utilization

Maintenance

Training

Deployment

Implementation

Procurement (initial investment)

ProductivityProfitPositioningCompetitive Standing

Investment

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Image: Flickr.com / MightyBoyBrian

Greater Efficiency, Effectiveness» Greater customer satisfaction

Unforeseen Opportunities» Early payment discounts

Process Change

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Process Change

Image: Flickr.com / MightyBoyBrian

Procedures Applications

Processes Technology

Working Betterdiscrete process innovation · continuous process

improvement

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Collaboration

Less Duplication of Effort» Saves time, frustration

Better Quality» Facilitates review, validation, correction» Reduces risk

Image: ©Ning Zhao | Dreamstime Stock Photos

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Collaboration

Working Better Togetherlearning & knowledge · relationship management

EmployeesEmployees

SuppliersSuppliers

CustomersCustomers

ShareholdersShareholders

InvestorsInvestors

ExecutivesExecutives

DirectorsDirectors

IT Dept.IT Dept.

FINANCE DEPT.

• CFO• Auditors• Managers• Receivable

s• Payables• Payroll• Pension

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Information as an Asset

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Elements of Information Value

Medium

Format

Context

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Missing or poor data? - No utility.

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Missing or poor data? - No utility.Missing or wrong context? - Not meaningful.

Context

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Mismatched formats? - Not shareable.

Format

Context

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Mismatched formats? - Not shareable.

Improper medium?- Not receivable.

Medium

Format

Context

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Decisions regarding one strandaffect all the others.

Medium

Format

Context

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Decisions regarding one strandaffect all the others.

Thus, they all must be continually well orchestrated in order to maximize value!

Medium

Format

Context

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ROI and TCO Don’t Talk About This

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ROI and TCO Don’t Talk About This

And That’s Why They Stink as Measures of System Value!

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Questions?

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Thank You!

Steve WeissmanMinister of Process & Information BettermentHolly Group

Tel 617-383-4655Email steve@hollygroup.comTwitter @steveweissman

Visit Weissman’s World at blog.hollygroup.com

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Steve WeissmanMinister of Process & Information BettermentHolly Groupsteve@hollygroup.com

Hosted by:

Jessica SnyderITMPIJessica_Snyder@compaid.com

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