A Brief Overview of Information Technology Returns on InvestmentMadeinkoreablog
Returns on investment can be defined as a measurement of gains and profits against investment in information technology. The benefits of IT may include financial or intellectual gains.
Any investment on business is aimed to bring in productivity and profitability. Some investments can help your business reap financially, and others may increase the productivity of your business which means profits remain unchanged; however lesser time and effort is required to bring in the same amount of profits. Information technology returns on investment are of two types, financial and non-financial returns, thus IT empowers both productivity and profitability.
Financial ROI refers to information technology that helps in increasing revenue and/or decreasing costs, sometimes information technology can help a business totally avoid initial costs. For an instance, if manually sending faxes requires dedicated personnel, automating fax machine using information technology would not require manual involvement, thus the cost to hire fax personnel can be cut completely.
Non-financial ROI refers to productivity aspects of information technology. Some examples of non-financial gains are better customer service and satisfaction with the use of latest information technology, enhanced decision making with the usage of analytics software, ability to spread the organization globally, advanced internal business and external communication over the network, increased reach to market and thus better sales.
Both financial and non-financial gains are coupled with some risk factors, even though most information technology solutions for business are aimed at increasing benefits. Information Technology at the basic level is controlled by the assigned authorities and to a major extent the correct usage of a system will allow a business to prosper with the help of implemented IT solution. These solutions can be monitored and controlled, however since those attributes are controlled by human employees it can always be altered as per convenience, this can be regarded as a loophole. There must be organization specific protocol to handle issues at this level; otherwise discrepancy in anticipated and actual ROI is obvious.
Your information technology provider will explain you about both the type of gains you may have from the technology they implement for your business. The key components of the ROI determination are time taken to realize gains, days until the same technology can be used without updating or upgrading, updating, upgrading or integration costs if any, initial costs and investment, final returns and profits, maintenance and support costs etc. This will facilitate easy decision making at your end. An established IT service organization will provide well formulated ROI document which is easy to interpret and understand. It is highly recommended to consult adept IT firms and understand the gains on investment, before initiating any IT project.
Source – Goarticles.com