The Hidden Return on IT Investment

No IT organization is perfect. On the other hand, IT is likely not getting sufficient credit with management for the value it is actually delivering. Similar to the old question: "If a tree falls in the forest and there is no one there to hear it, does it make any noise?" one could ask, "If IT undertakes an initiative, and fails to help management understand its value, does it have any value?" A deeper analysis of the IT portfolio finds a significant contribution to the corporate health and well-being that should be calculated and communicated.
Within the largest segment of the IT budget, maintenance and operations, many changes may take place during the course of a year. Older systems are phased out and new ones move from the new application category to the maintenance category. Some applications are routinely upgraded, increasing their usability or availability. Additionally, systems grow in size and number, such as computers, networks, storage, etc. Much of this change in number and size is masked by concurrent increases in efficiency so that there may be a minimal net change to the spending rate of this budget segment during the period of analysis. However, when one steps in and compares the contents of this segment over the period, it is clear that IT is now delivering more services to the organization than it was at the beginning. Quantifying the size of this increase in services over a year, we estimate that the 75 cents of each IT dollar spent in this segment is supporting five cents to 10 cents of new services.
Moving to the new applications category, there is little that we can do to justify an increase in value for a cancelled project. Though steps should be taken to decrease the number of such applications, methods for this are beyond the scope of this Planning Assumption. The ROI for the 10 cents spent on cancelled projects is zero.
Within the delivered but negative return category, the category itself points us to the ROI. The approximately seven cents spent in this budget segment must be returning between zero and seven cents (we will hope that there are a minimum of systems that decrease the value of the organization).
Moving to the value-positive systems, as with the previous category, the title points us to the likely returns. As a minimum, this eight cents of spending should deliver eight cents or more of return. Estimating the top end of return estimates at a 250 percent ROI (2.5 times the spending), we come up with an estimate of 20 cents.