In recent years, IT managers and analysts have witnessed a profound transformation in the role of information technology in companies. Once much more operational, the area has become crucial in achieving the strategic objectives of organizations.
However, the pressure from CEOs for permanent innovation is generally accompanied by demands for cost reductions in the IT area. This forces industry professionals to always have reports and charts on hand that prove the increase in productivity and the financial viability of investments in the sector.
But in a segment where part of the benefits brought to organizations are intangible, how can you convince managers that the impacts of technology are profound and irreplaceable regarding gaining competitive advantage, expanding levels of operational efficiency, reliability, security, etc.? We will answer this question by explaining how to apply and calculate IT ROI. Follow along with us:
How to bring ROI to your performance meetings?
There is no way around it. CEOs and other managers in the strategic area are obsessed with numbers, statistical data, evolutionary performance and cost-reduction spreadsheets, charts upon charts.
However, those in the field know that IT brings an ocean of intangible benefits to the business, such as productivity optimization (through greater data access speed), cost reduction (due to fewer operating system failures), faster decision-making (which can help the company gain more market share by “thinking” ahead of the competition), in short, there are many indicators that highlight the power of technology in the corporate universe. Alright, but we still need to convert all of this into numbers.
Although ROI (Return on Investment) is an indicator imported from Accounting Sciences, it is possible, with some adaptation, to use it to demonstrate the viability of IT projects in the company. However, before thinking about the ways to calculate IT ROI, you must have in mind the answers to preliminary questions about the area, such as:
- What is the volume of IT infrastructure failures that occurred during the month?
- What is the average downtime caused by these failures during the month?
With this data, we can calculate the total company hours lost monthly due to IT infrastructure failures where users could not perform their work, turning into paid hours not converted into work due to IT infrastructure failure.
Measuring IT ROI
There you go, starting from these numbers you can already have indicators for drafting IT ROI. Let’s look at a practical situation:
Calculate the cost of company employees affected by IT infrastructure problems by adding salary, labor, and tax costs. Next, divide these costs by the number of days in the month, and then by their working hours, in order to arrive at the hourly rate of each collaborator individually.
Finally, sum up all the hourly rates paid to employees who depend, directly or indirectly, on IT resources in the company. Let’s assume the company has 20 employees affected by IT, averaging an hourly rate of R$ 50.00. Therefore, you have a total hourly value of R$ 1,000.00. In other words, every hour, the company pays R$ 1,000.00 to keep employees at full productivity.
Done, the first step has been taken! Now, you can calculate the average number of hours that obsolete systems “freeze” the company, preventing employees from various areas from performing their duties. Let’s suppose you have a total of 5 hours per month, 5 long monthly hours where no one works due to problems in the IT infrastructure.
Multiplying the two data points above, you arrive at R$ 5,000.00! This is the amount the company loses monthly due to a lack of IT investment. Don’t forget to repeat the calculations and show (compare) the productivity gain that changes such as purchasing new equipment and systems, monitoring, and proper technical support can bring to the company.
The same can be done when comparing software license costs with the costs of using virtualization, adopting technologies like SaaS (Software as a Service), etc. The issue, especially in this case, is that some extra variables must be included in the calculations, such as initial problems with the implementation of new systems, the learning curve, and support costs.
As can be seen, it is possible to demonstrate, through the calculation of IT ROI, the potential for cost reduction and operational efficiency increase that a company can achieve, provided, of course, that it chooses a company that seeks to reduce incidents and increase the availability of the IT infrastructure.
And you, do you already know how to present the return on investment in the IT area to make your company grow? Share your questions with us and keep following the blog to stay on top of tips and news on the subject!
