More on Technology ROI

Mark Canes

Some feedback from my post on Handheld Technology ROI started me thinking (always a dangerous situation)...

Should all business technology investments be made solely (or chiefly) on the basis of an acceptable positive return on investment? I think most businesspeople will agree that it’s much easier to make (or justify) a decision when the numbers look positive. And yet we routinely see decisions made without due regard to the measurable benefits compared to cost. Why?

On the one hand, some spending decisions made without ROI analysis  may make perfect sense. Many of us have bought things (for business use) because they’re “cool”, not because they necessarily pass the ROI test. I don’t think that’s automatically a bad thing; if it makes you and Sheryl Crow happy…

On the other hand, the type of decision that I find truly puzzling is the one based solely on price, totally ignoring the (quantifiable) benefits of the different options under consideration. Consider being faced with these two proposals:

  1. Initial investment of $20,000, which will result in annual cost savings of $5,000.
  2. Initial investment of $40,000, yielding annual cost reductions of $25,000.

Which one would you opt for? Yeah, me too.

But not everyone makes the right choice here. In fairness, sometimes the return / payback is a little tricky to measure, such as saving an employee 5 – 8 hours per week – how do you quantify the savings when you’ll still be paying them the same salary? (More on this in a future blog post.)  But we’ve also seen the “cheaper” decision made when the payback is easily and readily quantified, such as reduced shipping rates or reduction of head-count.

One of the factors here is trust. If you trust the salesperson or company behind option #2, there’s probably no way you’ll choose option #1.  But in the absence of trust, that $25,000 annual reduction starts to feel risky, and one apparent way of mitigating risk is to spend less up front. I think there’s a lesson here for salespeople and technology companies, and it’s that no matter how good you believe your product is, and no matter how compelling your ROI analysis may be, it still all comes down to relationships and trust. Many companies try to overpower their prospects with data, at the expense of taking an actual interest in the people that they’re selling to. And that’s a big mistake.