Delivering ROI for your IT budget
Friday September 9, 2011
Delivering ROI for your charity's IT budget
Charity IT buyers are under considerable pressures; they often lack the budgets of private organisations, yet still must ensure the organisation's software enables efficient business processes.
For an IT purchasing decision to be most effective, it requires blended business and technology considerations. Return on Investment (ROI) is used to define the business value of an IT investment, and can enable third sector organisations to demonstrate business value and financial impact.
The provision of an accurate representation of the value of an IT investment, and demonstration of the level of ROI the charity can expect, how soon and how certain the return is, will in turn help secure buy-in for the purchase from the senior management team.
Project failures are all too common when delivering an IT project; the risk is particularly within the charity sector charities where decisions involving the investment of large sums of money can often be complex, touching many departments and donors and beneficiaries as well as employees. Decisions made therefore require very careful consideration, a significant amount of time and research. We contend that all charities need to use ROI as a key tool in the project armoury, like businesses do.
So what are the key considerations for third sector organisations looking to ensure an ROI for their IT budget?
Writing a business case
To deliver full ROI for your IT budget, it's important to consider the business case and long term function within the organisation. Without this strategic view, charities will fail to reap the rewards of building efficiencies into day-to-day operations.
A project is driven by its business case, which provides the most important set of information for the project and drives decision-making to ensure it is aligned to the overall not-for-profit objectives. The business case defines the benefits expected, as well as an understanding of the costs and risks of the project, and outlines the return you are likely to get for your investment.
A common oversight of many charities is to focus too heavily on cost. Greater emphasis should be put on ROI, as this will provide a better idea of whether the project represents value for money. In the long-term any business case should also be put into the context of the overall strategy and goals of the charity. Without this clarification of the organisational benefits a project is unlikely to gain approval from decision makers.
To deliver real ROI for the IT budget, an appraisal of the proposed investment should be conducted in advance. This will balance the development, operational, maintenance and support costs against the projected return that will be gained from the project over time.
Providing metrics by which the project can be judged to be successful is also important. This will illustrate the level of accountability that decision makers will be looking for. By setting a baseline - the 'do nothing' option, will give an understanding of the costs and benefits if the project is not undertaken. This can then be compared against the expected outcome if the project is completed.
Software Requirements Specification
Putting together a Software Requirements Specification (SRS) is key to understanding the software requirement needed. It should detail the function and capability required from the new development or system and is essentially a blueprint of what will be needed in the future.
The SRS document should consider what the software is supposed to do, how it should perform, its interaction with people within the organisation, the system's hardware and other software.
Alongside this the SRS should prioritise requirements and ensure they are quantifiable and measurable. Subjective and intangible requests need to be carefully considered to ensure that the solution meets the objectives of the project, and is considered a success after launch.
Managing project risk
Risk is a major factor to be considered during any project, particularly within the third sector, where budget is tight and success is therefore of even greater importance. To deliver effective ROI for the IT budget it is crucial that risks are identified, controlled and contained.
By implementing a consistent approach to managing risk, and putting into place a process to monitor them, the right balance of control can be maintained to deal with risks, and reduce a charity's exposure to them.
Top tips to ensure a ROI on IT budget
1. Planning is critical so charities should think carefully and plan every element, including how it will be used and who will use it.
2. Consider how IT software will improve employee or volunteer productivity, and if it will make processes more efficient and improve fund allocation to beneficiaries. This will enable a charity to clearly understand and demonstrate the IT project ROI.
3. With all IT projects, as many risks are non-technical as are technical. Because of this the introduction of IT software to employees needs careful consideration. For example, considering training one team at a time up to speed with its capabilities. To maximise ROI a strategy must be in place to encourage or force adoption of the new solution.
4. To maximise IT ROI a strategy must be in place at the outset to determine if the IT solution is a cost effective option for the charity and how it will impact on the bottom line long-term.
5. Consider the timeline for ROI. Correct planning and preparation is crucial to understanding at what stage the organisation can expect to see a return on its IT investment. This sets realistic expectations, allows changes to be made if expectations are not being delivered, and acts as a helpful reminder to actually evaluate ROI after the event, something which is all too often forgotten.
This article was published in Civil Society on 6 September 2011.