Ro……….what?

RoI and TCO remain unused elements among Middle East enterprises, making them incapable of quantifying the benefits of technology investments.

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By  Sathya Mithra Ashok Published  October 1, 2007

"So what kind of RoI has your recent implementation given you?"

"What kind of.......what?"

"Return on investment....what kind of return on investment has your recent technology deployment given you?"

"Hmmmmm.....am sorry, but I am not familiar with that term."


You might well think that the earlier bit of conversation is something I made up to go with this comment piece. I wish it was the case.

Return on investment (RoI) and total cost of ownership (TCO) are two of the technology vendors' favourite terms. They are two terms that many use extensively to sell their products, to bolster promises of better performance and to enforce that their systems address the business needs of an organisation.

But the question is, do Middle East enterprises and their IT managers know what those terms actually mean for their businesses? And what's more, have they any idea how they can go about assessing the cost and returns from any of their investments?

In the simplest terms, return on investment refers to the ‘pay back' that an IT system might provide to the organisation. This can take the shape of anything from increased productivity to adding to the firm's bottomline. TCO, on the other hand, refers to the overall cost involved in running, maintaining and obtaining optimal performance from the system.

Together RoI and TCO provide organisations with a strong foundation for measuring and understanding not only the overall effectiveness of their IT solutions, but also their exact contribution to the business, if any. Without an effective grasp of the concepts and without an assured means of calculating both, enterprises have no way of quantifying in clear terms what exactly they are getting from those costly technology investments.

It is quite shocking that a significant number of large enterprises in the region not only do not keep track of the RoI and TCO of technology investments but many do not have any awareness of the lack thereof.

Most Middle East enterprises, in fact, remain unsure of what these terms mean. And in many cases we are talking rather large organisations - such as universities and medical firms - with a constant investment cycle in the latest technology, with the need to improve performance and productivity at every stage.

While this by itself is rather disturbing, even those enterprises who are aware of the concepts often do not attempt to put their technology to the test. This is because of two crucial reasons. First, most IT managers and their departments do not make adequate time for planning and measurement so find themselves unable to monitor and evaluate technology as a continuing process.

Second, there is no one standard way to measure RoI and TCO, which organisations can employ across their systems. There is no formulaic equation that IT managers can blindly use to appraise hardware and software. It is rather a computation process that IT managers have to develop, adapt and change based on the organisation's specific functions, and the technology investment under question.

For example, if an oil and gas company invests in remote infrastructure access and management systems it could calculate RoI and TCO on the cost that has been saved in manpower, the increased efficiency achieved by proactive network management, the savings made on travel of IT personnel from location to location as well as the consolidation of infrastructure and applications to a centralised location.

That is a really basic example. The same firm can use several other factors to assess what the technology is giving the organisation. And the factors will be quite different for an organisation in a different vertical, even if it uses a similar solution.

Certainly regional enterprises are increasing their collective spend on the latest high-tech systems. But it would be rather foolish to talk about growing IT maturity among these organisations when the majority lack a consistent base from which to measure their technology investments. IT managers bear the burden of putting in place a comprehensive way of evaluating and measuring, on a continuous basis, the relevance of any technology that an organisation chooses and whether or not it adds productively to the functions of the firms.

Otherwise, getting the most out of technology investments might just prove to be a case of groping in the dark.

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