ROI Predictors
Many of the returns in ROI (return on investment) analysis are intangible or difficult to quantify. For example, it is nearly impossible to assign a dollar value to improved customer service, even though better service undoubtedly helps build customer loyalty and retention. In spite of the difficulties, such returns often reflect the true value of IT investments. They are crucial to a total analysis of technology and should be the focal point of a technology evaluation.
Demand is now growing for a standard method of analyzing the enterprise server side of the client/server model. As the open-services marketplace continues to evolve, the need for an objective evaluation of TCO and ROI for enterprise servers becomes even more critical. Enterprise servers are the engines driving this computing paradigm. That is why it is more important than ever to select the right technology.
When organizations consider purchasing new technology, they typically want to know how the technology can enhance the strength and health of their business. In other words, they want to evaluate what the return might be on their investment. Tools for analyzing the ROI are continually in development. ROI analysis generally concentrate on three general categories: new business opportunities, investment protection, and a total life cycle framework.
New Business Opportunities
Today, there is a rush of companies implementing e-commerce, e-services, data mining, and other applications. It's obvious that new technology can open up new markets and create new profit centers. The challenge is deciding if the value of the new opportunities justifies the investment.
Even when technology does not enable new business opportunities, new systems can enable businesses to operate more efficiently and effectively. Technology can create a competitive advantage by giving companies an edge in several areas, including:
Heightened employee productivity through the ability to handle repetitive tasks automatically.
Faster time-to-market through better communication and collaboration.
Improved customer satisfaction through improved response times and higher system availability.
Product and service quality improvements through quality assurance applications and enhanced data analysis.
Investment Protection
When companies have already invested in technology, they want to leverage those previous expenditures. If two proposed systems provide comparable business opportunities and enhanced competitiveness, organizations generally choose the one that can provide the greatest protection of the current investments. This was one of the key goals of the joint Hewlett-Packard–Intel design team and why HP has also put considerable planning into the transition process. This will be described in more detail in the following chapters. You will also learn more about the binary compatibility to protect software investments.
A Total Life Cycle Framework
Incorporating the total life cycle and solution into TCO analysis is still not comprehensive enough. If the user considers just the TCO of various options, he or she could easily waste IT dollars on technology that underperforms or overperforms. TCO can determine which option is least costly, but it cannot tell which option can provide the greatest competitive advantage.
For the most useful analyses, IT consumers must scrutinize both the potential costs and the potential benefits of their systems. In essence, they can combine TCO analysis with ROI analysis. A solid benefits analysis can determine which platforms are viable without expensive, time-consuming cost analyses. Organizations can develop shortlists of systems that meet minimum requirements and then perform cost studies.