Calculating ROI for process improvement
Among the many changes in the software industry over the past 40 years, the consideration of information technology (IT) from a return-on-investment (ROI) perspective is fairly dramatic. Decades ago, IT was considered a necessary overhead expense. Now, profit-generating business units regard software as a critical part of their infrastructure and competitive advantage. In fact, companies that do not leverage information technology as a key part of their business strategy to cut costs and increase productivity may ultimately cease to exist. Simply put, the proper positioning of IT and its associated processes is now vital to keeping corporations in business.
Many senior managers today are focused on cutting costs, increasing profitability, and improving productivity. Because an IT organization is traditionally a cost center, and not a profit center, it is very difficult to discuss the development of software in terms of profitability. So for now, let’s not attempt to address the ROI issue in terms of pure profit. But parts of the software development lifecycle can be quantified in terms of cost savings and increased productivity, which are actually two sides of the same coin since both can be reduced to the ROI factor.
Colin O’Neill
http://www.ibm.com/developerworks/rational/library/edge/09/mar09/oneill/index.html