Value to business

Perspectives on benefits

There are four commonly used terms when discussing service improvement outcome s:

• Improvements
• Benefits
• ROI (Return on Investment)
• VOI (Value on Investment).

Much of the angst and confusion surrounding IT process improvement initiatives can be traced to the misuse of these terms. Below is the proper use:

• Improvements – Outcomes that when compared to the ‘before’ state, show a measurable increase in a desirable metric or decrease in an undesirable metric

Example: ABC Corp achieved a 15% reduction in failed changes through implementation of a formal Change Management process.

• Benefits – The gains achieved through realization of improvements, usually but not always expressed in monetary terms.

Example: ABC Corp’s 15% reduction in failed changes has saved the company Ј395,000 in productivity and re-works cost s in the first year.

• ROI – The difference between the benefit (saving) achieved and the amount expended to achieve that benefit, expressed as a percentage. Logically, one would like to spend a little to save a lot.

Example: ABC Corp spent Ј200,000 to establish the formal Change Management process that saved Ј395,000. The ROI at the end of the first year of operation was therefore Ј195,000 or 97.5%.

• VOI – The extra value created by establishment of benefits that include non-monetary or long-term outcomes. ROI is a subcomponent of VOI.

Example: ABC Corp’s establishment of a formal Change Management process (which reduced the number of failed changes) improved the ability of ABC Corp to respond quickly to changing market conditions and unexpected opportunities resulting in an enhanced market position. In addition, it promoted collaboration between business unit s and the IT organization and freed up resources to work on other project s that otherwise may not have been completed.

Intangible benefits

When used in Business Cases, soft benefits (intangibles) are IT investment payoff areas not expressed in monetary ways. ‘Less frequent use of temporary workers makes hourly employees feel better’ is intangible if no believable monetary impact is shown. Conversely, ‘Less frequent use of temporary workers will save Ј100,000 annually in labour costs’ is tangible when expressed in believable pound terms.

Traditionally, one of the most difficult Business Case problems is quantifying soft benefits such as increased brand image and customer satisfaction. When hard numbers are available to support an ROI argument, it may seem easier to leave the soft benefits out altogether. Instead, use the soft benefits to tell a story in the Business Case.

Attempt to capture value that lies beyond the reach of an ROI calculation such as:

• Increased organizational competency
• Integration between people and process es
• Reduction of redundancy increases business throughput
• Minimized lost opportunities
• Assured regulatory compliance that will minimize costs and reduce risk
• Ability to react to change rapidly.

Дата добавления: 2015-10-02