What criteria should tech managers use to evaluate the ROI for new technology? Recent research by the Delphi Group and others indicates that reduced cycle time, or faster value-chain integration, and increased customer retention are the key metrics.
Decreased cycle time provides a hard metric for assessing how technology increases an organization’s ability to deliver a new product, reposition current offerings, and build partnerships. The effect is a substantial reduction in the cost of developing, deploying, and distributing any new product or service in ever more complex value chains.
Customer retention is equally important. In times of economic uncertainty, the value of existing customer relationships is magnified. According to the Delphi Group, the use of key technologies, such as customer portals, creates a strong bond with customers and a greater likelihood of continued stable revenues. It also increases the likelihood of increased revenue opportunity through cross-selling and up-selling. In assessing customer perceptions, the immediacy of access through self-service was ranked as the highest criterion for valuing the impact of a technology. Most customers in this study indicated that the costs of moving to a new supplier are often much higher than the savings that may actually be realized.
Importantly, ROI is not a single event. Instead ROI has to be proven not just before implementation but post-implementation in order to sustain the project through the payback period.