TCO versus ROI

If you understand what metric your company wants to see, you’ll understand what your company thinks of your IT department. Kim Nash of works off of that premise in this article found on Citing a CIO survey, Nash explains how return on investment (ROI) accounted for more decisions about IT than total cost of ownership (TCO). As the article explains:

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.

TCO is great for necessary projects (like updating an email system, as shown in the article), but it’s not very good for discovering any sort of increased value or possible growth. So, by extension, if your company is more interested in understanding how your IT project can promote growth or uncover revenue opportunity, they are likely more sophisticated about the strategic use of IT, and you as the CIO are more likely to be included in meetings to that end. If, however, your company is only interested in TCO, then chances are that IT is only seen as a necessary cost in the company, and you’ll have a harder time adding innovation or value to the business.

If your company is more interested in ROI of IT projects, chances are high that they view your department as just another in the business department. This is a good place to be, particularly if you’re concerned about IT becoming more and more distanced from company decisions or centralization. Read the full article here:

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