How
to Conduct Return On Investment Assessments to Justify IT and Other Programs
J.
Kuong and MASP Staff
ISBN: ISBN 0-940706-61-X
- Publication MAP-52
DETAILED
TABLE OF CONTENTS
Preface
1. Well-Managed Organizations Demand a Return On Their
Investment – ROI
1.1 Background
1.2 What Is ROI?
1.3 ROI and the Information Technology Field
1.4 Where
Does the Money to Justify New Programs or Ventures Come
From?
1.5 Intangible Benefits as a Source of Profits
1.6 Key Sources of Increased Revenue and Profits
2. Components and Considerations in ROI Estimation
2.1 Chapter Objectives
2.2 What Enters Into an ROI Estimation
2.3 A
List of Elements and Factors that May be Required to Estimate ROI Depending on the Approach and Method
Used
2.4 Explanation of Key Terms
1. The Upfront of Initial Investment
2. The Savings, Cost Advantage, Income or Savings
Stream
3. Intangible or Imponderable Benefits
4. The useful
Project Life or the Period of Time over which
5. The Period of Time Before the program is Installed
and Before It Provides Benefits or Savings – Time Before Zero
6. Recovery Period
7. Payback Period
8. Cost of Capital
2.5 Considerations in Justifying Less Evident
Areas Such as
Physical and IT
Infrastructure Using Intangible Factors
2.6 Importance of Developing a Sound
Justification Document
2.7 Key Elements of a Justification Document
2.8 A Summary of Success Elements in Selling and
Justifying Programs to Management Using ROI Concepts
2.9 What is the Value Proposition – Tangible
and Intangible Values
3.
Approaches for Assessing Return on the Investment
3.1 Background
3.2 Chapter
Objectives
3.3 Classification
of ROI Approaches
3.4 Cost
Recovery
3.5 Time
to Recover Investment
3.6 Ratio
Approaches
3.7 Time
Value of Money – Present Value
3.8 Intangible
Factors or Benefits
3.9 Scenario
Approach
3.10 Other Approaches -
Rapid Economic Justification (RJE)
3.11 Comparing ROI Figures
From Several Methods
3.12 Assessing ROIs
Presented By Vendors or Other Potential
4. Methodologies and How to Apply Them
4.1 Chapter Objective
4.2 The Most Commonly Used Methodologies
4.3 Methodology
for Justifying Ventures or Proposals Using the More Complex ROI Methods that Consider the
Time Value of Money and the Projected Useful Project Life
5. Illustrations of ROI Estimation By Various Methods
5.1 Chapter Objective
5.2 Methodologies Selected for Illustrating the
Computational Procedures
1. Payback
Method
2. Return on
Investment – Simple Method
3. Internal or
Interest rate of return
4. Present Value
Approach – Time Value of Money
5. Scenario
Approach for Justification
5.3 General
Commentary on the Merits and Drawbacks of the
ROI Methods
Illustrated in This Chapter
5.4. A detailed Illustration of the Present Value ROI
Method
Step 1. Prepare
a Base (Reference) Case on the Present Situation
Step 2. Define
the Key Proposed Program Objectives
Step 3. Describe
the Proposed Program Solution
Steps 3 and 4.
Program Solution and Costs
Step 5. Proposed
Case
Step 6. Benefits
Step 7.
Calculate Cost Effectiveness or Profitability
5.5 A detailed Venture Justification
Illustration
5.6 Program
Profitability Illustration
5.7 Discounted
Cash Flow Method (DCF) Fundamentals
5.8 Illustration of the Use of the Discounted
Cash Flow ROI Method
5.9 Optimizing the Level of Service or Benefits
5.10 The Development of
Costs and Benefits for Venture
Appendix
A.
Literature
References
B. Glossary of Terms
C.
Index