What Does It Mean?
IT ROI measures the efficiency of your investment in IT operations, projects, and new technologies. The metric monitors the returns you receive relative to each dollar you invested and covers a broad range of measurements, including cost savings, revenue increases, and even some non-financial results.
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Why Does it Matter?
IT is an essential part of any organization, but it shouldn’t operate at the expense of your company’s financial health. New IT initiatives are always full of potential, but the cost realities don’t always align with the benefits you get out of them. Measuring your ROI for IT projects can help you plan your tech strategy better, and will let you know to abandon initiatives, projects, and technologies that have run their course or which cost too much to represent valuable additions to your company. Critically, your IT ROI can help you reduce costs, avoid costs, and find areas to improve your price efficiency (such as switching providers).
How Do you Measure the KPI?
To measure your ROI for IT projects, you must first have data related both to your expenditures per project or investment, as well as the revenue they generated. The standard ROI IT calculation is as follows:
ROI = ((revenues – investment costs) / investment costs) x 100
Generally speaking, you want your ROI percentage to be higher. However, it’s worth noting that using ROI is not always ideal for every IT expenditure, including activities such as replacing broken equipment, short-term projects that can be completed in a few days, or aspects related to necessary costs (such as compliance and regulation. Use this dashboard as an ROI template for IT projects.
What Data Sources Would You Use to Measure the KPI?
To measure IT ROI in your IT dashboard, you can include data from a variety of sources. This can include time spent on a project (per team member), revenues tied to implementations, project expenditure reports, and overall costs for your IT department.
Give me an example…
Imagine you’ve spent a considerable amount of time planning a new major IT project that should revamp your internal operations. Once you start the implementation, however, rubber hits the road, and unplanned issues start popping up. Even so, you’re convinced that the project is worthwhile, so you start tracking your costs. By measuring your IT ROI, you can tell if your new IT project is really worth the money you’re investing. More importantly, you can tell exactly when it stops becoming worthwhile to avoid spending more money than you need to on it.
What Benchmarks/Indicators Should I Use?
- Net present value
- Total project costs
- Project revenues
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