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ROI on an IT project

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  • #28874

    Sinnicks
    Participant

    Folks:
    I’m a middle manager involved in IT projects, for a large non-IT financial-services corporation. I’ve always wondered what the ROI is on our IT projects (which are presumably for the benefit of our lines of businesses.) I’m frankly surprised it is so hard to find metrics on ROI for our IT projects (I suspect this is also true in the business lines, albeit to a smaller extent.)
    I’m interested if I can attribute direct gains to my IT projects if I applied Six Sigma techniques. I understand that Six Sigma is a process improvement method, but if there is a tangible way I can attribute the level of success (ROI) of Project A (without using Six Sigma specific techniques–e.g., DMAIC, SIPOC, statistics) compared to the realized ROI of Project B (using Six Sigma techniques).
    Question 1) to the Six Sigma experts on this forum, what techniques do you recommend I should consider in determining quantitative ROI for my IT projects?
    Question 2) do you think I will see a clear impact in comparing the ROI of Project A to Project B, presuming that all other factors are equal, except for the application of Six Sigma techniques to Project B?
    Mark

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    #72585

    Eoin Barry
    Participant

    Hello there,
    I suggest you map your process in detail as it is before the project (include the inputs and outputs and a measure of the efficiency of each step). Then map the process as it after the project redeploying the resources saved by the project as a result of increased efficiency or better and/or more timely information. Cost those resources over the lifetime of the project. Discount at the appropriate rate against the investment and there you go.  It might be better to do this at the planning stage – although it might not always be to the advantage of the IT group.
    But I’m afraid you’re not the only one that has difficulty in justifying IT spend. 
    Many examples of  “Lean thinking” are provided by the  benchmark company Lantech. They had at one point in their history invested significant amounts in IT infrastructure. Through the use of lean methods they simplified their processes to the extent that they returned to a paper based system for manufaturing and eliminated the need for costly IT manufacturing systems upgrade!
    Best of luck, I’d be delighted to hear how you get on or if you need any further assisstance drop me a line.
    Eoin
    [email protected]
     
     

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    #72592

    Alexandre D’Aquino
    Participant

    Dear,
    To understand the project’s IT ROI you have to consider tangible and intagible benefits. And first of all to develop the IT projects ROI you have to define a step by step methodology, that will be executed during the project to plan the ROI analysis during the project development and after the project development.
    In the company that I work we have developed a methodology to analyse IT projects ROI, considering six different dimensions to analyse IT projects ROI.
    If you need more information send me email. 
    Regards.

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    #72600

    Dewayne
    Participant

    Alexandre, I would appreciate obtaining more information on the six dimensions analysis methodology you mentioned. Sounds interesting. Thanks
    [email protected] 

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    #72602

    Luis Gomez
    Participant

    Alexandre:
    Could you please provide some information on your Six dimensions ROI methodology for IT projects?
    I am working currently on some IT projects and it would be an excellent benchmark.
    Thank you very much.

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    #72631

    Judy Collins
    Participant

    I am also interested in your six different dimensions to analyse IT projects ROI. 

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    #72632

    Tim Young
    Member

    Mark,
    I am currently right in the middle of putting together a model on the ROI on Six Sigma in IT. We sell Six Sigma based IT Service Level Management tools and so this is critical to our sales process. Most of the published information about this tends to focus on the ROI…at the end of the project, but clearly you want to know this at the outset!
    I believe the only way you can do this is to consider the impact improved IT processes have on the business processes they enable. For example, in a CRM center, how much additional business could be generated and/or how many customer service reps could we let go, if we could increase application throughput by, say, 15%.
    Other savings can be gained in terms of increased productivity of IT staff (ie people focus on the problem that impact the business), reduced number of calls to the Help Desk and so on, but relative to what can be achieved on the business side, this is small fry stuff.
    Clearly, this requires someone in the IT department to have a good understanding of the business and, often times, that’s a problem.
    Since my ROI analysis will be used to justify expenditure on our products, this is clearly not the right place to continue this discussion, but if you are interested in more details, please do not hesitate to contact me. You may find my model an interesting starting point.
    Also, if you find anything useful, I would be very grateful if you could pass it on!
    Regards
    Tim Young ([email protected])

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    #72679

    Mike Carnell
    Participant

    Try contacting Rob Tripp through Six Sigma Qualtec. He has worked this type of analysis for years at a lot of different companies.
    If you want to work it out yourself get some information on Activity Based Costing. Basically you wrap a mini ABC model around each project.

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    #72680

    Laflamme
    Participant

    Question 2)  I think you’ll see ROI in time to implement and time spent on rework.  There is always rework when customers (end-users) are not considered.  There is less rework when customers are involved from the start.
    Question 1) 

    I think one of the greatest advantages is involving users as customers in IT projects.  Use DMAIC if you’re upgrading a software or system.  Part of the upgrade includes ‘how’…some CTQs may include minimal system downtime with an USL of 1 hour, etc.  Working with customers will make the upgrade much smoother. 
    Use DMADV if you’re creating an IT solution to digitize a manual process, building a QFD based on your end-user needs (CTQs)…for example, the CTQ in the QFD may be easy accessibility to customer account information.  The characteristic could be accessible without having to open a new program, or accessible within 15 seconds, etc.  From there build that functionality of web-based, or some sort of solution for intranet CRM tool that is always open, etc. 
    I know I’m over-simplifying, but give it a try.
     

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    #72687

    Ian Shakespeare
    Participant

    Hi Alexandre,
    I’m also in the process of implementing IT solutions so your 6 dimension ROI methodology would be a great help.
    Thanks in advance.
    Regards.
    Ian.

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    #72688

    Chris Rye
    Participant

    Hi Alexandre,
    I’m just starting to work with our IT group and it would be very helpful if you could share details of your metrics on ROI.
    Thanks,
    Chris.

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    #72698

    Taylor
    Member

    Alexandre,
    I would also be extremely intrested in your 6 Dimensions for IT ROI.  You can contact me at [email protected]
    Thank you in advance,
    Regards,
    -Todd

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    #72701

    Dan the Man
    Participant

    Calculating ROI on IT projects is a very interesting topic and complicated for several reasons:

    Rarely, very rarely does the delivered IT project resemble the original or planned product and more rarely is it delivered on-time (after we need to consider the time value of money and/or opportunity cost).
    How do you calculate ROI on the enabling portion of an IT project? Inherently, most IT projects intentionally or unintentionally are enablers.
    I would love to scrutinize someone’s ROI calculations.

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    #72706

    Yogish Kaushik
    Member

    Hi Alexandre,
    It would greatly help if you could share the ROI model that you have developed…….we are also scouting for a suitable ROI model to evaluate IT products/solutions.
    Thanks,
    Yogish

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    #72768

    john beaudoin
    Participant

    I appreciate the interest you have in applying 6-Sigma to IT.  I am a Project Engineer for a Parts Distribution Center.  We have our own independant IT group that maintains our Mainframe, makes new programs for the Mainframe, such as Foreign Trade Zone, Cycle Counting, etc.  They also maintain our computer networks.
    From My Experience, it is the job of the controlling management to come up with the ROI on a project they want the IT group to work on.  Operations management calculates the benifit of being able to do X, and the IT department is responsible for estimating what resources it will take to make X possible.  Then operations management compares the perceived value of X vs. the IT costs to create X.  This is important because in the 3 Fortune 500 companies I have worked for, I have never seen an IT department that didn’t have a list of items to work on that wouldn’t keep it busy for a couple of years.  As a result, prioritization of projects is very important so that the largest gains can be achieved first.
    With that said, my coworkers and myself are constantly complaining about the poor service, communication, and perceived lack of productivity coming from the IT group.  Remember that 6-Sigma’s primary goal is to reduce the error rate as seen by customers who have expectations for a product.  Do you have customers for what you do?  What are their expectations?  Are you currently meeting their needs satisfactorily? (You may need to do a survey for this).
    Second, you can use some 6-Sigma tools to analyze your current processes as some of the others have suggested.  When a program is completed and ready to be tested, are there bugs that need to be fixed?  Are there a lot of them?  How much time is being spent reworking the programs to get the bugs out?  Why are the bugs there in the first place?  What would it take to reduce the amount of bugs and rework time?  Does the program do what it is supposed to?  If not, why not (Technical impossibilities, miscommunication with customer, lack of time, etc.).  If you can improve on all of these things, you will be known througout your company as the IT god, and you will have job security for years to come!

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    #72786

    Cristina
    Participant

    Alexandre,
    I would appreciate more information on the six dimensions analysis methodology you mentioned.
    Thanks,
    Cristina
     

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    #72809

    Lily
    Participant

    Hi,
    I am interested in ur methodology too. Would u pls share the materials? Thanks

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    #73080

    ong
    Member

    I would be very interested in any information that you could forward to me.

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    #103116

    Soni
    Member

    Can you share some info on the methodology to analyse IT projects ROI ?

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    #103119

    Savage
    Participant

    Soni,
    You might check out this link.  It’s the isixsigma software channel.
    Good luck.
    http://software.isixsigma.com/

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    #103123

    John Palka
    Participant

    I have worked on IT projects for over 20 years.  Frequently, they do not result reduced costs as a result of a reduction in headcount.  In fact, many systems require an increase in headcount in order to maintain all the data.  That is what happened as a result of our new SAP system.  After the installation, each production area hired 2-3 data and documentation coordinators to enter SAP data and transfer materials from one area to a downstream process.  We have never been able to measure the ROI on our SAP investment.  However, we do have a consensus that SAP is good for our business and provides a competitive advantage. 
    John

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    #121948

    ROI for 6 Sigma
    Member

    My company is also seeking a ROI Model for Six Sigma.  Can you share anything?

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