Project Management Newsletter
 
NEWSLETTERS
 

CIO.com updates, insights and advice on technology, management and your career.

 
 
 
LEADERSHIP
 
CIO Executive Programs
The Leader in Face-to-Face Education for Senior Executives

Offering regional and national programs, CIO (and CSO) events bring together some of the most respected names and thought leaders in information technology and security. Presented by CIOs and other senior level executives, these invitation-only programs offer timely topics and strong networking. Learn More »

 
CIO Executive Council
A Peer-Advisory Service and Professional Association for CIOs

Turn Geeks into Leaders

June 17, 11:30 AM - 12:30 PM U.S./ET (GMT-4)

Larry Bonfante, CIO of the U.S. Tennis Association, will discuss the skills and approaches that your rising IT leaders must learn to be effective in an executive capacity.

How to Handle Your New CEO: Managing Turnover at the Top

June 18, 11:00 AM - 12:00 PM U.S./Eastern (GMT-4)

Turbulent times have increased turnover at the top. Find out what Council CIOs have done to "break in" new CEOs—build relationships, set expectations, educate on the role of IT.

Mid-Market CIO Panel: Tips and Techniques for Improving Vendor Relationships

July 15, 4:00 PM - 5:00 PM U.S./Eastern (GMT-4)

We'll highlight relationship priorities and best practices identified in a Council study, and we'll interact with a CIO panel on the approaches they've used to improve strategic vendor partnerships.

Executive Competencies Assessment Tool

Assess Your Business Leadership Skills with the Council's new benchmarking tool. Rate yourself in change leadership, strategy, customer focus and more.

More / Register »

Learn more about the CIO Executive Council »



 
 
RESOURCE CENTER
 
 
 
SUBSCRIBE TO CIO
 
Are you involved in setting the direction for your company's IT budget or strategy?

Apply today for a FREE subscription to CIO Magazine!

 
 
 

TCO versus ROI

Whether return on investment drives more technology decisions than total cost of ownership shows how your company views IT.

 

April 09, 2008CIO

Return on investment (ROI) metrics drove more IT project decisions in the past year than did total cost of ownership (TCO), an exclusive CIO survey finds. Which metric is used more often signals how the IT department is viewed inside your company.

Devising ways to show the value of corporate technology has occupied CIOs for about as long as the 25-odd years the profession has existed. While measures such as internal rate of return and economic value added are applied with mixed success, ROI and TCO remain stalwarts.

An ROI calculation quantifies both the costs and the expected benefits of a specific project over a specific timeframe, usually three to five years. TCO, on the other hand, includes just costs.

"When you think TCO you don't see IT as a business driver or an asset that can increase revenue, profit or customer value," says Anthony Giannino, a consultant at Cornerstone Solutions, a value-added reseller in Chicago. Giannino was CIO at pharmaceutical distributor Alliance Wholesale from 2002 to 2007.

In an online survey of 225 technology managers, 59 percent said that ROI influenced whether they pursued a project in the past 12 months, compared to 41 percent who reported TCO justified the decision. In the coming 12 months, the relative difference in importance between the two measurements is more pronounced: 62 percent of respondents favored ROI compared to TCO's 38 percent.

"ROI has to be the answer. TCO only looks at one side of the equation," says Wayne Sadin, CIO at Loomis USA and a survey respondent who chose ROI.

TCO, Sadin says, works well for must-do infrastructure projects, such as upgrading an e-mail system. An IT leader might present options to other senior managers that compare the cost of adding one e-mail feature or another. But e-mail doesn't typically uncover new sources of revenue or other topline growth opportunities that ROI can measure, he says.

Ken Harris, CIO at Shaklee Corp., agrees. He chose ROI in the survey, too. Although TCO has a place, extensive use of ROI signals how sophisticated a company is about IT's strategic importance, Shaklee says. "There has been for awhile a shift going on toward more IT projects that impact topline than that are just focused on cost savings," he says. Harris has also been a CIO at Gap Inc., Nike and Pepsico.

 
 
Loading...
 
WHITE PAPERS

Achieve Business Agility and Productivity

Learn how to evaluate ROI in hard dollars and soft dollars with three key ROI metrics.
 

Meet Rising Demands on IT and Cut Costs

Strategies for Modernizing IT, Reducing Costs, and Improving Operational Efficiency
 

Save On Data Center Costs

Using a five step process one organization was able to eliminate more than 2,000 servers from their IT infrastructure
 

Deliver Higher-Performing Technology Services with ITIL

Enable the business and your IT organization to cope with the effects of economic stress.
 

The Future of Financial Reporting

Finance and accounting executives must understand, adapt to, and manage the costs associated with changes: and doing so opens an opportunity to leverage this shift to better position their companies in the eyes of the investment community.
 

Enterprise Performance Management

15 years after "The Performance Measurement Manifesto" was published by the Harvard Business Review, companies continue to redesign how they measure their business performance.
 

WEBCASTS

BMC Service Assurance Demo

What if you could predict disruptive IT events and automate their resolution -- all before they disrupt your busine...
 

BMC Service Automation Demo

BMC Service Automation automates repetitive, manual tasks (such as provisioning, patching and compliance) to reduce...
 

BMC Application Performance and Analytics: Predictive Intelligence in Action

See the highlights of BMC's Application Performance and Analytics; a predictive, resourceful and intelligent soluti...
 

Taking the Service Desk to the Next Level

Listen to this conversation with Doug Mueller to learn how standards and processes have evolved to bring us the ser...
 

How to Reduce Eclipse BIRT Development Effort for Data Visualizations

Live Webcast: Wednesday July 15th 2 PM ET / 11 AM PT

Web applications can come with a long list of visualiz...
 

Gen Y: IT's 'FWC' - Friends with Challenges

IT Professionals are positive on Gen Y employees. But that's just half the story. Their love affair with social med...
 

Resource Alerts

Get instant email notifications by topic when white papers, webcasts, and case studies are added to our library.

 
FEATURED SPONSORS
 
 
 
SPONSORED LINKS
 

Taking the Service Desk to the Next Level

Maximizing the Business Value of the PC Infrastructure

How Interactive Viewer Reduces the Effort to Meet Visualization Requirements

Top 10 Business and IT Drivers for the Wealth Management Sector

BPM Survey Results: The Real-World Analysis

BPM: Leveraging Competencies and Streamlining Processes to Achieve Operational Excellence

Achieving Pervasive Performance Management

Automating the Generation and Secure Distribution of Excel Reports

Accenture IT Consulting: Enabling high performance. More...

Top Five CIO Challenges

Insight makes it easy to spend your Microsoft subsidy check.

Five minute business analytics assessment. Immediate results.

Dangerous Collaboration Practices: 5 Ways IT Can Minimize Risk

Accenture: Outsourcing for uncertain times. Click to learn more.

The Case for Investing in Business Analytics Technology. Read white paper.

Live Webinar: Applying Business Analytics. Click here to learn more

Developing A Dynamic, Real-Time IT Infrastructure

Data Loss Prevention: A Better Way to Approach Security

Using Open Source to Deploy Web Applications

Cloud Computing: Read about VMware's compelling vision & set of products

Enterprise PBX Buyer's Guide

Secondary Market Primer: Your Network at Half Price

Losing Ground: 2009 TMT Global Security Survey

White Paper: 8 Key Ingredients to Building an Internal Cloud

Read about virtualization and consolidation effort best practices

Seven Ways ITIL Can Help You in an Economic Downturn

Communications and Collaboration Needs at Business Organizations

Top-line Performance that's Bottom-line Efficient

5 Steps to Automating Accounts Payable

BPM ROI calculator

Disciplined Autonomy: Resolving the Tension Between Flexibility and Control

Smart Decisions: The Role of Key Performance Indicators

Introducing the new HP ProLiant G6 server family

Accenture: Outsourcing for Competitive Advantage. More...

Better spam protection with Postini for just $1/user/mo

Introducing the new HP ProLiant G6 server family

infoBOOM! - The Mid-Sized Company CIO's Exclusive Community

Accenture IT Consulting: Logical meets technological. More . . .

The Fraudster Economy Model: Operating a Business in the Underground

Trade in your old laser printer and get up to $1000 back!

Revolutionizing Enterprise Application Deployment

Why Data Loss is Increasing--and What You Can Do About It

Learn how to managing client systems in the enterprise.

Build a High-Performance Open Web Platform

Mid-Sized Company CIO Community: infoBOOM!

Enterprise PBX Comparison Guide

Getting Value from Outdated Networking Equipment

Stop Application Fraud at the Source with Device Reputation

Learn about the VMware vSphere (TM) & Intel (R) Xeon (R) Processor 5500 Series

Learn how a virtualized enterprise can help your company reduce costs