How CIOs can take technology ROI to the next level
The pace of change for a tech leader’s role has increased with digital disruption and the emergence of cloud platforms. It pays dividends to understand how to overcome the challenges facing today’s CIO. One of the biggest challenges that CIOs must understand is how to take technology ROI to the next level and how to discuss business returns, particularly when it involves cloud initiatives.
How to demonstrate business needs
For Australian CIOs to achieve technology ROIs, you need to focus on what’s required to meet business needs. Demonstrating how new technology might make an impact on the company is more than just talking dollars and cents.
For example, when discussing cloud providers, rather than just discussing generic OpEx cost savings as reasons to move to a cloud model, you will need to demonstrate a business case in terms of measuring real ROI for your business.
This means working with other department heads that you may not ordinarily engage with to discuss the real measures that you can compare and contrast against pre- and post-implementation of the project. Many of these measures may be guesses, approximations or assumptions, but that's ok.
Armed with this new information, you should now:
Discuss with business stakeholders responsible for each area
Agree on appropriate assumptions
Also consider running multiple scenarios for Best Case, Probable Case, and Worst Case measures.
How can you measure business ROI of technology?
When considering business ROI of technology projects, it’s important to understand that business units (particularly finance) will view it as a cost centre.
The IT group can sometimes struggle as they aren’t exposed to the business metrics. While it’s not something that can be done overnight, and must be chipped away at over time, here are some business measures from IdealWare to get started with:
Choose a timeline – for subscription items or equipment maintenance contracts, this is typically measured in years.
Costs – these can be money, staff time, disruption and frustration, and opportunity cost. Also consider the cost of doing nothing. Include related technology costs such as training, support and the cost of retiring legacy applications or equipment.
Benefits – some examples include: saving money, increasing productivity, improving customer satisfaction measures, agility, opening up new markets (estimate their worth to the business and the likely market share you can capture), broader market reach, and other benefits.
Some ROI analysis falls short because it does not fully capture the benefit side of the equation. Think about what your organisation is trying to achieve. Try to also put a dollar amount on that goal in terms of social ROI, for example carbon emission reductions or benefiting employee satisfaction.
How to communicate technology ROIs with your CEO
It can sometimes be tricky for a CIO to effectively communicate your business case with your CEO, particularly if they do not come from a tech background.
Harvard Business Review has some great pointers of things to include in your business case vocabulary when communicating the benefits of cloud services to a CEO.
Focus on ‘soft costs’ – this is particularly effective for a CEO that is sceptical about cloud and thinks the status quo is just fine. If your organisation can afford comprehensive software and top IT talent (which will be harder to come by in the future, especially for emerging technologies), then your CEO’s assumption is correct. However, most IT departments are stretched thin. Maintaining everything in-house is difficult, expensive, and time-consuming, especially if your company is trying to re-purpose older legacy technology for the modern age.
Quantify ‘hard’ costs – on average, only 11% of a company’s IT budget is spent on developing new applications, according to Microsoft; the rest goes to maintenance and infrastructure. That 11% is mainly focused on strategic programs, such as core enterprise systems.
Identify where you can make individuals more productive – particularly for mobile workers and those working from home who need access to key information and platforms to do their jobs. Calculate the upload/download wear and tear on infrastructure (therefore costs) as well as time multiplied by the entire mobile workforce over a year. You can then easily compared this with the cost of making those applications or documents web-accessible.
Data-driven insights – data is the one area where benefits can result in multiples of investment or shift entire markets and industries. Using data from employees, customers, partners, and suppliers can provide a goldmine of opportunity – however it is best to have a few key ‘quick wins’ mapped out to demonstrate the effectiveness of this approach.
Speed up application development – Cloud development platforms free up your application developers to focus on writing good cloud, rather than the tasks of buying, configuring, and maintaining servers. In addition to building and hosting apps, cloud providers are now making their own powerful software available to customers that your teams can upload data to and overlay to create powerful third-party applications.
There has never been a more exciting – and yet more challenging – time to be a CIO than today. Luckily, there are many options to help the ambitious CIO realise a positive career trajectory and win the respect and trust of business leaders.