Return on IT investment

1. Farrokh Alemi, Ph.D. Return on IT investment

2. Importance of Return on Investments

3. Importance of Return on Investments

4. Importance of Return on Investments

5. Morgan Stanley: “US firms lost $130 billionin unwanted IT systems” The problem is with our methods Problems are so widespread that it could not be due to mismanagement

6. List of Costs & Savings • Underestimates affected business processes • Assumes IT increases revenue • Assumes unused buildings have no costs • Training & maintenance costs ignored • Impact on productivity and quality ignored

7. Proposed Analysis

8. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

9. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

10. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

11. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

12. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

13. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

14. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

15. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Clear relation in scatter diagram • Large pair wise correlation • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

16. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

17. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

18. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

19. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

20. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

21. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

22. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

23. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

24. Steps in Proposed Analysis • Gather data over at least 3 periods • Money spent on IT • Use of IT by the business unit • Organization’s or business unit’s revenues • Examine association between IT cost, use and revenue • Often positive and significant • Examine causation • Revenue leads to IT use and investment • IT investment and use leads to more revenue • Calculate ROI

25. Investment In DoIT Numerous units were merged into DoIT in this time period. DoIT organization defined based on 2002 operation and budget reconstructed.

26. IT Investment & University Revenue

27. Example: Evaluation of DoIT The Division of Instructional & Technology Support Services includes: • Audio Visual Services • Academic Computing Labs, • Electronic Classrooms, • GMU-TV, • Instructional Resource Center, • Johnson Center Technology • Student Technology Assistance Resource Center. A key service provided by DoIT is the WebCT course delivery system

28. Possible Sequence of Events

29. Possible Sequence of Events

30. Possible Sequence of Events

31. Correlations

32. Possible Sequence of Events

33. Conclusion of Analysis

34. Objective Analysis of ROI Take Home Lesson