ROI and Payback Analysis

Transcription

1 ROI and Payback Analysis Carol Blanchar, Principle and Founder

2 Connecting Solutions to Business Results Conexo specializes in streamlining programs to dramatically decrease program costs and ongoing operations expense, while significantly increasing payback and business gains. We focus on communication and coordination to support the relationships between technical teams across vendors, channels, and functions.

3 1. Available Applications Begin with a list of the applications, including services and tools, that operations can make available to users of a target workgroup, as a result of a planned investment. 2. Operational Savings Rate each application based on estimates of the annual operational savings. 5 = Significant and sustainable operational savings quarter-to-quarter 4 = Significant operational savings as a one-time decrease during migration off old technology 3 = Some operational savings plus increased sourcing choices 2 = Some operational savings from same or fewer sourcing choices 1 = Little or no operational savings This rating will be compared to a workgroup rating of the same applications, based on what teams and functions are most impacted, and what performance metrics will improve, without changing current business processes.

4 3a. Workgroup Need for Applications Workgroup team and functional managers rate each application, based on how critical it is for each team or function. Critical to team: 5 = Can't live without 4 = Makes a big difference to our end customer or channel partner experience 3 = Invisible to customer but makes a big difference to our team performance 2 = Probably helps our team perform better 1 = Little or no impact on our team at all This builds collective judgment about the workgroup's need for these applications, with some detail about which teams and functions have the most need. This rating helps workgroup and operations managers focus service and application rollout and maximize the benefits to the workgroup.

5 3b. Workgroup Performance Improvement from Applications Workgroup team and functional managers rate each application that operations can deliver based on how it would improve overall performance, based on current metrics 5 = Significant and sustainable performance improvement quarter-to-quarter 4 = Significant one-time performance improvement from the move to the new solution 3 = Some performance improvement now but can be more if we change our business process 2 = Some performance improvement only if and when we change our business process 1 = Little or no impact on our performance This rates applications as collective judgment about the impact on current performance metrics, with no change in business processes. The result helps focus application rollout to maximize quantitative payback for the workgroup.

6 4. Business Goals Begin with a list of the business initiatives that keep an enterprise competitive in a fast-moving, global market. Let the Line-of-Business managers customize the list to reflect current initiatives in which they are investing. 5. Payback on Business Initiative Rate each business initiative based on Line-of-Business and financial managers expectations of the gains if the initiative meets and exceed it s goals. 5 = Significant and sustainable gains quarter-to-quarter 4 = Significant gains as a one-time increase 3 = Some gains plus increased business portfolio flexibility 2 = Some gains with the same or less flexibility 1 = Little or no gains This creates a collective view of which of the initiatives are expected to bring the most gains to the Line-of-Business. This estimate of gains will be balanced with the analysis of which of workgroups are most critical to each initiative, based on the impact of improving their performance. By comparing the two resulting ratings, operations and target workgroups can begin to focus on the highest-payback teams, and lay a foundation to quantify the investment returns based on improved department / workgroup performance.

7 6a. Business Initiative Need for Critical Workgroup Teams Line-of-Business and workgroup managers rate the importance of teams and functions to critical initiatives Critical to initiative success: 3 = Critical 2 = Significant 1 = Minor Impact This shows the collective judgment about the dependency on certain teams and workgroups to achieve their targeted business goals. This rating is used to help Line-of-Business and workgroup managers to prioritize application investment in workgroup performance.

8 6b. Leverage from Improved Team and Function Performance Line-of-Business and workgroup managers rate teams and functions by the gains that would result from improving their performance. Improved performance from this team or function means the business initiative will achieve: 5 = Significant near-term and increasing long-term gains 4 = Significant near and long-term gains 3 = Significant near-term gains and probable long-term gains 2 = Probable near-term and long-term gains 1 = Little or unknown impact This rates teams and functions in terms of how much their improved performance leverages gains from current business initiatives. This rating based on performance improvement helps collaborative operations, workgroup, and Line-of-Business analysis to focus application rollout and maximize the benefits for the business overall.

9 7. Completing the ROI on the Application Investment Operations, workgroup, and Line-of-Business teams together identify the services and applications that deliver significant operational savings, increase team performance, and improve business results. This provides a foundation to plan solution investment, focus rollout, and quantify the return on application investment. This combined view also guides sourcing discussions, and gives better direction to solution providers, and solution proposals and comparisons. Line-of-Business initiatives connect directly to the performance of critical workgroup teams, completing the connection between investment in an application and business results. The savings, performance metrics, and initiative payback can be quantified by adding current operations, workgroup department, and business planning financial data, and then combined with the solution costs to show pro-forma income statement and balance sheet, free cash, payback, and growth. This analysis also helps quantify strategic returns as well, including lasting competitive advantage, sustained growth in revenue and margins, increased agility, improved market position, and faster response to opportunities.