Return on Investment “is IT”

I have often made the case that an information technology (IT) degree from one of our schools is an investment that has a better return than other comparable investments. Did you know though that one thing that IT professionals ought to be darn good at is calculating an estimated return on investment (ROI)? I believe that this is so important, that I ensure that ROI calculations come up frequently in the IT curriculum.

In this blog, I will tell you about how important it is to think in business terms when “doing IT.” Terry White put it well in his book, What Business Really Wants from IT, in which he said that Information Technology folks ought to not just work with IT stuff to “do IT things,”1 but IT professionals must engage with the rest of the business pros in business terms. This is made clear in Greg Kemmetmueller’s recent publication in the December 2008 issue of Rangefinder, a magazine for professional photographers. Greg is an IT student at the Minnesota School of Business, and his publication is based upon work that he did in one of my classes.

For example, in our Introduction to Business and Security class, students determine an opportunity for a security enhancement at their current place of employment (if they have one) or elsewhere. In this assignment, they must justify their plan by demonstrating how much money it will save in security-related losses.

When you express this savings as a ratio of essentially money saved to money spent, you have calculated the return on investment:

Clearly, if you don’t save more money then you spend, you have a bad investment.

I think it would be more exciting for you to read all about it in Greg Kemmetmueller’s publication, “Information Security and Data Protection” in the December 2008 issue of Rangefinder, a magazine for professional photographers. Greg’s day-job is to work for his family’s professional photography services firm. In his publication, he demonstrates the power of an ROI calculation to justify the importance of having a good data backup system. The URL for Rangefinder is http://www.rangefindermag.com/ and a link to Greg Kemmetmueller’s (now archived) article is here: Information Security and Data Protection.

It ought to be the case that IT professionals think like business professionals. IT folks shouldn’t just work with IT stuff to “do IT things.” Each IT project or expenditure should correlate with a clear positive impact on the bottom line of the organization and this impact should be stated in financial terms.

1White, Terry. What Business Really Wants from IT: A Collaborative Guide for Business Directors and CIOs. Butterworth-Heinemann. © 2004. Books24x7. <http://common.books24x7.com/book/id_28178/book.asp> (accessed March 2, 2009)