How much does ROI really matter?

Our cover story this month (Perception and deception) is dedicated to a subject that has become ubiquitous in the IT management field over the past two to three years – return-on-investment, or ROI.

No one can ever accuse the IT industry of half-hearted marketing. As soon as it become clear, somewhere towards the end of the dot-com boom, that great freight-loads of dollars had been spent on technology projects that would never give a return, the technology industry anticipated trouble and got into gear.

Suppliers pulped the marketing brochures that promised exciting new revenue opportunities, and started in earnest on the roll out of their latest project, the web-based ‘ROI calculator’. This enables customers to prove beyond all reasonable doubt that an investment in x or y will produce a positive return in an acceptably short time.

It is not clear if these initiatives have had much impact – after all, few sales people are finding deals easy, even armed with such overwhelming evidence – but they have captured the spirit of the times. Technology investments, so the thinking now goes, must be, and can be, justified at the cellular level of the ROI spreadsheet. And if the numbers aren’t right, then the financial director gets to wield the veto.

But as this month’s article shows, the willingness of suppliers to get sucked into some detailed debates about ROI has left some of them exposed. Even flagship customers, it seems, often do not get a clear financial payback – and if ROI features heavily in the sales pitch, that doesn’t look good.

Although no-one, in these or any other times, should ignore the importance of getting a good return, it may be time to step back and remember that many, perhaps most, big IT investment decisions are extremely complex and involve many variables. ROI calculations and tools, however sophisticated, will never be clever enough.

Sometimes, an investment is made on gut feel and it works because the management is determined to make it work; other investments pass every business-school metric but fail through apathy, ignorance, poor management or bad luck.

IT is a powerful tool, and so is accountancy, but they are still just tools.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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