Every day we take for granted things like voice mail, email, chat, and texting, but it might be interesting if we could get into the “Wayback Machine” with Mr. Peabody, and go back to that one crucial moment long ago at some corporate board meeting, when (theoretically at least) some management executive might have asked, ‘Well, Mr./Ms. CIO, give the board an estimate of the ROI for this email thing you’re proposing. What productivity does it offer? What kind of return can we expect? What are the negatives? What could it cost us, if it’s a flop?’
Exactly how would a CIO have measured the ROI or an ROU (Return on unawareness) or RON (Return on negligence) or anticipated the real productivity gains of email or any of these other now ubiquitous tech tools? Furthermore, what if we become so focused on the advantages that the negatives from unawareness or negligence or whatever, are never put on the table? For example, free flowing data seems like a commercial boon until a data breach event occurs. (Vasant 34:31 to 37:53) Even external Events can also affect IT projects and may need to be considered - a volcano stopped European flights back in May of 2010 and negatively impacted a TMO IT project, according to CIO Ina Kamenz, of TMO. (CIO Talk Radio show: Measuring ROU & RON for IT, July 28, 2010 40:31 to 41:25).
Bottom line, responsible financial management understandably wants an upfront assurance of the reasonable value of an IT investment before allocating funds for it, despite the fact that it may be hard for any CIO to anticipate everything (return on unawareness or return on negligence or risk) that should go into that number. While we aren’t suggesting that the inability to pinpoint a number value for unknowables should be allowed to kill or delay some nascent IT innovation or enhancement with real potential, we must find ways to introduce reasonable guestimates, tradeoffs, or buffers into the numbers on which management will base its decision. (We suggest you listen to the recent discussion on making tradeoffs and prioritizing projects et al, on the recent “CIO Talk Radio” show, Measuring ROU and RON for IT, July 28, 2010: CIO Ina Kamenz, TMO on Trade offs and offsets – (37:53 to 41:25) and Vasant Dhar, MIT –implicit ranking (23:12 to 24:40) and the benefit-to-risk approach (34:31 to 37:53).
Ultimately, there are more IT projects to fund than there is money to pay for them. While at present, figuring ROI seems more of an art than a science, we’re long past the point where someone can avoid numbers and just place a lucky bet on some risky disruptive technology and expect a win.
Tell us, how does your organization figure ROU and RON and other risks into the calculations for IT projects?