Most companies conduct return on investment (ROI) analyses during the proposal phase — but not upon completion. This article examines the value of post-project ROI — including the career boost it can provide to IT professionals. Read about: The business case for post implementation ROI studies, from future buy-in to improved recruitment. How to build cross-departmental consensus to measure ROI. Real-world examples, including EPL, University of Melbourne, and SofTech.

As Published In August 2004

Just the Facts
By Karen J. Bannan

How much did it really cost—and was it worth it?

It seems obvious. You've put time and money—lots of it—toward your IT investment. Before you got started, you did an estimated return on investment (ROI) analysis for your proposed project—you weren't going to get the money if you skipped that step. But what happened once the project was completed? A postimplementation ROI analysis can be just as valuable—to your company and your career—yet less than half of companies calculate the ROI for a project after it has been implemented. You may think that you know how your project turned out—your users are happy (or miserable), your tech staff is satisfied with its accomplishments (or gone). But unless you quantify your results, you may not have much that's tangible to show to your boss, the board of directors, or your next employer.

More than Expected

Take, for example, Birmingham, Alabama-based EPL, a data processing solution provider for more than 150 companies in the credit union industry. The company develops standalone software solutions as well as i-POWER, a browser-based solution for credit unions. In 2000, EPL upgraded its back-end software to reduce its infrastructure's cost of ownership—a move that wasn't easy or inexpensive.

The 27-year-old company's IT staff performed an internal ROI study during the early planning stages and came up with a projected cost savings of about 40 percent, says Michael Stoeckert, EPL's chief information officer and chief technology officer.

The Results Are In

Still, with such a significant investment—EPL, with Oracle Consulting's help, installed Oracle Application Server, Oracle Database, Oracle Collaboration Suite, and Oracle Application Server Portal—Stoeckert wanted to be sure his analysis was correct. So 18 months after the initial installation, EPL signed on for a postimplementation ROI analysis offered by Oracle's Global Customer Programs organization. EPL provided Rochester, New York-based Shack & Tulloch, the independent consulting firm chosen to conduct the ROI analysis, with financial and operational data via telephone and face-to-face interviews. The results were astounding, says Stoeckert. Shack & Tulloch discovered that, instead of a 40 percent cost savings, EPL had gained a 75 percent savings. The study also projected that EPL's economic profit or shareholder value would grow by US$3 million as a result of the new implementation, a return of more than 700 percent. In addition, EPL's customers would benefit from shorter product development cycles, since the software let developers work more efficiently, boosting the speed of innovation by 600 percent. The most surprising fact, however, was that EPL's implementation prevented what Stoeckert says could have been unavoidable financial problems.

"The [postimplementation] ROI study showed us that, yes, we were profitable, but prior to the implementation, the more we grew, the more it was costing us," explains Stoeckert. "We weren't growing efficiently because the costs of our previous solution were just too high...that was a surprise to our finance department."

All the Right Moves

ROI studies aren't new. But companies are just starting to see the benefits of a postimplementation ROI study. And they're huge, say experts. After all, although choosing the wrong product can be costly, it's even more so when you support an implementation that isn't optimized correctly or when you don't take full advantage of a successful one, says Amir Hartman, founder and managing director of Mainstay Partners—a technology consultancy based in Redwood City, California—and author of Ruthless Execution: What Business Leaders Do When Their Companies Hit the Wall. "With a typical medium-to-large company, it is not uncommon for IT investments to make up between 50 and 75 percent of their total capital investments every year," says Hartman. "If you look at your average company, less than ten percent of them consistently get returns that cover their cost of capital for IT investments."

A postimplementation ROI study requires commitment from a variety of internal departments, ranging from the IT staff to finance to personnel to purchasing. It can take anywhere from two weeks to two months of a company's time, depending on the company size and its IT infrastructure. That doesn't include the prestudy work that's done by the financial analysts who conduct the study.

Many companies offer their customers ROI analysis, but what Oracle offers is more sophisticated. Oracle funds the studies, which are often conducted by outside consulting firms so there's no bias. This allows customers to feel more comfortable with the process and the results. It also lets them see beyond their IT investment.

"What's unique is that instead of judging an implementation project on its technical aspects—which is important, too—we provide more focus from the customer's standpoint so they can actually clearly see how that implementation is solving their business problem," says Jeb Dasteel, vice president of Global Customer Programs.

Paying It Forward

One of the most obvious benefits of an ROI study is proof of concept, which often results in additional funding for other IT projects. John Julian, director of systems projects at the University of Melbourne in Australia, says he's hoping his ROI study will help him do just that—get approval and support for other IT projects.

Julian's team went into its technology upgrade with an unusual directive. The University of Melbourne wasn't looking for financial savings. Instead, it was looking to improve resource planning and analysis so it could better handle staffing and administrative issues. "It's not a numbers business," says Julian. "It's an attitude business." If his installation did what it was supposed to do, it would not only free his staff from maintaining its old proprietary legacy systems, but it would also protect and support the university's public image.

"The ROI study isn't finished yet, but we're anticipating that when it is, it will be extremely helpful in getting support for the rest of [our technology] implementation. We'll be able to say that not only was this expenditure—which a lot of people had doubts about, I'm sure—justified, but it's been proven to be justified," he says. "In a university, all my boss wants to know is that we're not on the front page of the paper and that no one is complaining about the system. It's a different attitude, and that's where we're successful. So we're successful if no one notices, essentially."

Scottish Water, the result of a merger of three former water authorities in Scotland, had a different priority. According to Cheryl Black, customer service director at Scottish Water, quantifying and publishing her company's success was very useful. "Scottish Water is a publicly-owned company, and an important benefit was that, through the ROI study, we received very positive coverage in the press and were able to elevate the perception of Scottish Water and our customer service. The ROI study also helped us to understand more fully the benefits of the business transformation that we had conducted, and this helped us get more buy-in internally."

Both of these enterprises' experiences demonstrate another benefit of postimplementation studies: bridging the gap between IT and the rest of a company. Simply put, says one expert, ROI studies help IT executives communicate more effectively. "We find that IT is a bit behind when it comes to articulating the value of an IT investment to other executives," says Lisa Cash, chief executive officer and president of Princeton SofTech, a database archiving company based in Princeton, New Jersey. "They aren't good at demonstrating their value. The marketing organization has market share to prove its value, and the sales staff has sales numbers. There isn't a defining statistic for IT unless you perform an ROI study."

Taking It Public

The ripples from an ROI study are often felt months and even years down the road. For example, EPL's Stoeckert says his company is recruiting better employees from a wider applicant pool because he demonstrated that the company has vision.

"It would take upwards of six months to get an employee before we had an ROI study to back up our success. Now, because of the proof of vision we have, we're getting very highly skilled candidates and are able to hire them within 30 days," he says. "Every time I go and speak, I have someone come up to me and give me their business card, telling me if we ever have openings, they want to be considered."

His company, along with others like it, often uses information from an ROI study in recruitment efforts and marketing materials, creating favorable mind share and a growing market share. Companies and people like doing business with—and working for—smart businesses. An ROI study that points to a successful implementation can be viewed as definitive proof that a company makes good decisions and hires competent executives—something research bears out, says Mainstay Partners' Hartman.

"If I compare companies who get good results from IT versus companies who get poor results, the differences have little to do with technology," says Hartman. "The differences have to do with management behavior, which is very controllable."

Getting Personal

Princeton SofTech's Cash says her clients discover that ROI studies result in an unexpected benefit: a career boost. "I have one customer who just finished a comprehensive ROI study, and he's seeing an increased number of speaking engagements," she says. "His personal stock went up because the company has demonstrated real results."

EPL's Stoeckert says his company's ROI study changed his career. Stoeckert suspected that his company's ROI was higher than predicted, but when the results came back they were a validation of his leadership. Because the study proved that his instincts on the Oracle implementation were right, he's gained the respect of his peers. Stoeckert was given more responsibility within his own company and has been tapped for speaking engagements many times since the ROI study results became public. "I have notoriety more and more as a visionary in my field," he says. "Plus, I'm making business connections that I might not have made before. But the best thing was what our employees saw when they were presented with all these different proof points. It was easy for them to say, 'Well, this is what I did all the hard work for.'"