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Measuring Financial Returns on IT Investments

Total Cost of Ownership (TCO) and 2) Return on Investment (ROI). Describe each of these approaches, state your preference, and analyze the advantages and disadvantages of each with a focus on IT investments.

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There are two primary approaches to measuring financial returns on IT investments: Total Cost of Ownership (TCO) and 2) Return on Investment (ROI).

Describe each of these approaches and analyze the advantages and disadvantages of each with a focus on IT investments. Which approach do you favor and why?

Return on Investment (ROI).

ROI calculations quantify both costs and the expected return of specific IT project over a specific timeframe. ROI is very useful concept of any kind of investment of any resource providing service or benefit to the invertor (or) an organization. The higher ROI indicates always allures investors. This is the widely used industry standard to justify an investment.

ROI can also be used as a performance measure to evaluate the efficiency of an investment or to compare the efficiency of the number different investment options in hand. A simple formula to calculate ROI (%) = (Net Profit / Investment) * 100

Net profit = Gains from investment - Investment

Advantages:
a) All activities are assigned to a specific dollar amount that empowers mangers to decide whether the task is worth of the investment.
b) There are many ways to determine ROI it is easy incorporate into any system: IT, management, consumer or external ...

Solution Summary

The expert measures financial returns on IT investments.

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