When businesses negotiate price with technology vendors or consider new projects internally, they frequently demand persuasive proof of a positive return on investment as a requirement to go forward. Often described as the time it takes to recover the cost of an investment with a resulting benefit, this kind of predictive ROI ahead of a large project is not an unsound idea. But such calculations always involve assumptions, some of which inevitably lose credibility on close examination. In such cases, ROI projections might be used to enforce an executive bias, or as a poker chip in a pricing negotiation - rather than as a good or bad reason for a company to make an investment.The point is that positive ROI is an outcome of good strategy, not a strategy unto itself. Though smart companies will continue to make smart investments, as scale and scope increase, predictive ROI loses predictability. In some cases the ROI fixation is simply inappropriate. How, for example, does one establish future ROI for a data warehouse project, a long-term investment from which most benefits will not be evident until years later?
Mark Smith, CEO and SVP of research at Ventana Research, has witnessed a good bit of hype in certain aspects of defining and justifying a return on investment for business intelligence. By the same token, Mark works with world-class companies that wrestle with such issues.
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