Maximising RoI from available technologies
The COVID-19 Leadership Guide about strategies for managing through this crisis [1] presents valuable insights in retrospect. There are several relevant topics, however, utilising existing IT assets or available technologies and tools caught my eye.
In many cases I have seen the first reaction to any problem is to buy something new. This happens almost instantaneously without taking into account related costs for migration, decommissioning, required development or customisation, impacted human resources, training and so on.
This also applies to available capabilities within current technologies and platforms. Existing APIs, integrations, software components, tools add-ons may already be resolving the need you have since it is mostly likely someone else has already step on this before.
One of the responsibilities of the Architecture team is having a well-defined inventory of IT assets, tracking usage of current technologies, tools, APIs, integrations and understanding when they can be reused specially while going through a crisis and solutions are needed to be delivered reliably, accurately and promptly.
Having clear KPIs is the ideal way to understand if usage is in line with the expected behaviour, and we are getting the return of investment from our technologies. Furthermore, it allows detecting whether we are under utilising existing platforms, technologies, tools, etc.
Business processes
Understanding current processes, what they are trying to accomplish and why they were established in the first place is an essential first step to successfully manage change and optimise the return on any technology investment. [2]
Business processes will align with applications and services as described in the picture below. Once these processes are well understood, it is easier to figure out reusable technologies. For instance, an easy one is email; once all activities that rely on email are understood, it is easier to maximise the use of the email provider e.g. Office 365 email rather than having different solutions each time.
Another classic reusable example, document generation and storage. Usually business processes involving documentation generation and storage are similar across the Enterprise, so underlying technologies can be reused and optimise the return of investment.
IT asset management
There are typical roles that an IT asset manager will take care [3]:
- Calculating depreciation and ROI values
- Planning for the procurement of assets
- Managing equipment users and usability
- Maintaining and renewing software licenses
- Planning for the disposal or replacement of IT assets
This does not mean it needs to be a specify person, but responsibilities could be shared among IT leaders in the organisation.
So, how do you calculate Return On Investments on an IT asset?
You can determine ROI in different ways, but the most frequently used method involves dividing net profit into total assets. The return on investment ratio is also called the return on assets' ratio because that investment refers to the firm’s investment in its assets. Calculate the ratio as follows:
Investment gain (Net Income) / Cost of Investment (Total Assets) = X%
Where Net Income comes from the income statement and Total Assets come from the balance sheet.
An example
A company invested $100,000 in the license of a software that brings efficiencies to the business for $20,000 per year. This means there is a benefit of 20K into 100K invested, equals 20% RoI. After the review of several business processes, the software can also be used in another process that benefits another team for 15K. Then, RoI increased to 35%.
References
- [1] COVID-19 Leadership Guide about strategies for managing through this crisis from Korn Ferry
- [2] How to Maximise Your Return on Technology Investment by Ivan Seselj
- [3] What Is an IT Asset Manager, and Why They’re Essential
