ROI and TCO

What to include and what not to include is always the subject of discussion when trying to do these calculations. I participated in an exercise to do this, which included a certified accountant and a business analyst. And there was still a certain amount of play in the numbers. For example - how do you appropriately designate management time as part of labour costs - some of its people management, some of it is project management, some of it is issues management and some of it is customer management. If you survey the managers, all you will get is rough estimates which may bear no relationship to reality.

How do you measure IT work done by non-IT staff - there is always someone in every department who provides some level of technical assistance. The challenge is how accurately you can gauge that - it varies widely from department to department, and even the people doing it wouldn't give you a accurate assessment.

In my humble opinion, ROI is best assessed on a project by project basis. You need to look at all the IT projects as a portfolio - some projects are to renew the infrastructure or accomodate organizational growth, some project are there to lower operational costs, some projects are there to assist the growth of revenue or to retain customers. You should look to balance all of these activities yearly, and reasses.

For ROI, I like to use payback period, calculated in months. Projects which are designed to lower costs should have a short period, infrastructure building may have a longer period.

Thats just a few ideas from someone who has been there.

James