How to calculate the return on investment of informatization?

Unfortunately, when many CIOs are asked about the benefits of IT investment by CEO and CFO, they can only answer by improving enterprise efficiency, expanding customer base and strengthening branch management. Only a few CIOs can prove its value with some simple calculations. How to calculate the return on IT investment? How to measure the return on investment (ROI) of IT? This is not only a new topic of information construction, but also a new topic that CIO and CFO need to face together. The informatization construction of hard input and soft return is "real money", but the output is "soft return" which is difficult to calculate by numbers. Some returns can be quantified, while others are difficult to quantify. Some are short-term and some are long-term; Some are financial returns, some are non-financial returns, and some are social returns. To measure the input-output ratio of IT investment, another concept, TCO (Total Cost of Ownership), cannot be ignored. For typical IT projects, such as ERP, CRM, SCM, etc. It is necessary to investigate all the related costs in the "life cycle" of the five stages of technology and system acquisition, implementation, operation, maintenance and update. Specifically, it includes six aspects: the expenses during the planning period, including the market research expenses of the information system, the research expenses of the system demand analysis, and the third-party management consulting expenses; Expenses in the implementation process, including basic data preparation, personnel training expenses, system prototype testing and parallel testing expenses, system acceptance and evaluation expenses, etc. Acquisition costs include computer hardware equipment (servers and terminals, network equipment, data storage equipment), software systems (software, operating system, database, implementation costs) and secondary development costs. Post-service and maintenance costs, including system operation, maintenance and software upgrade. Final disposal cost. Risk costs mainly include internal risks caused by the choice of information system architecture, illegal intrusion caused by imperfect system security design and system collapse caused by improper disaster prevention measures. Informatization construction is a hard investment of "real money and silver", but the output is a "soft return" that is difficult to calculate with numbers. There are many ways to calculate the returns brought by information systems, especially management information systems. Scholars at home and abroad have also designed many calculation models, but so far there is no convincing calculation method, because some of the returns brought by informatization can be quantified, and some are difficult to quantify. Some are short-term and some are long-term; Some are financial returns, some are non-financial returns, and some are social returns. Financial returns are mainly manifested in reducing inventory, reducing delayed delivery, shortening procurement lead time and reducing procurement costs, while non-financial returns are mainly manifested in enhancing the ability of enterprises to dynamically adapt to the market and improving decision-making level. The benefits brought by e-government construction, in addition to improving the work efficiency of business departments and reducing office costs, are more social benefits, such as the "Golden Shield Project" for social stability and the "Golden Project" for maintaining market order, mainly social benefits, which are difficult to calculate by economic benefits. Due to the influence and restriction of many factors, the problem of measuring enterprise IT investment and return is quite complicated, which is far from being covered by several financial statements. The following focuses on the short-term rate of return and long-term rate of return of IT investment, quantitative and non-quantitative evaluation indicators, in order to look at this issue more completely and objectively. & lt！ -# # # # # #-& gt； Short-term rate of return and long-term rate of return Some benefits of IT investment can appear immediately, while others take a long time to appear. IT projects with simple requirements and clear goals, such as CAD and CAM, can be effective in a short time, such as how much efficiency has been improved and what work could not be completed before; IT takes a long time for the returns of large IT projects such as ERP and CRM to fully show. For example, the ERP of a domestic enterprise has a large scale, including five modules: finance, management accounting, sales and distribution, material management, production planning and e-commerce. The whole implementation process is divided into three steps: the first step is project implementation, the second step is promotion, and the third step is overall optimization. The whole project has a huge investment and takes a long time. It is really hard to see how much economic benefits can be brought to the enterprise by the implementation of a certain functional module at a certain stage. But in the long run, once these standardized functional modules are integrated, this huge information system will not only bring a leap in management to enterprises, but also lay the foundation for their business to be in line with international standards. Not only different projects have different payback periods, but also the same projects and different enterprises have different payback periods. There are many purposes of IT investment, such as reducing customer churn rate, improving product design level, reducing inventory and strengthening branch management. In the final analysis, it is to improve the production efficiency and management efficiency of enterprises. But as far as evaluating "efficiency" is concerned, the reference indicators of enterprises at different stages will be different. Of course, enterprises in the survival stage require to calculate the input and output clearly and pursue the short-term rate of return on IT investment; For enterprises whose careers are on the right track and in the development stage, they will look further on the issue of return, and generally will not stick to the immediate rate of return, but pay more attention to the long-term rate of return. Therefore, to measure the benefit of enterprise it investment, we should fully consider the actual situation of enterprises, because enterprise informatization itself is a process of continuous improvement, which needs to be implemented step by step and cannot be achieved in one step. The results of quantitative evaluation and non-quantitative evaluation of informatization construction can of course be measured, but the standard and form of measurement are not so direct, which means it is difficult to calculate with a clear and quantitative standard at present. For example, adding a PC can not see the direct benefits, but at least it can replace some manual processes; The establishment of ERP can not only see pleasing changes, but also feel that the original order has been completely disrupted. It is difficult to find a set of completely objective standards to measure the benefits of informatization, but there are some quantitative and non-quantitative indicators that can be used as reference for evaluation standards. ① Quantifying benefits, reducing inventory (inventory occupancy, inventory capital turnover times and inventory error), rationally utilizing resources (shortening production cycle, improving production efficiency, reducing assembly area and reducing overtime), delivering on time, improving customer service quality (on-time delivery rate), reducing costs, purchasing expenses, overtime wages, increasing profits, reducing financial revenue and expenditure errors and reducing economic losses. (2) Quality and efficiency, leaders and managers have mastered the marketing, production and financial operation, and the appearance and quality of employees in the enterprise have changed greatly. Managers have been liberated from transaction processing and devoted to standardized and substantive management, which has a certain guarantee effect on product quality. & lt！ -# # # # # #-& gt； Sort out the benefits. Before the implementation of informatization, CIO should "freeze" the old figures, and then calculate the "new" figures after the information system runs for a period of time, so as to quantify the energy figures as much as possible; On the other hand, for the benefit indicators that are difficult to quantify, CIO should carefully collect the "stories" of business departments and use cases to illustrate the management changes and efficiency improvements brought by informatization to enterprises. Although IT is difficult to measure the benefits of IT investment with an evaluation system, CIOs should try their best to sort out the benefits of informatization, so that the management can see the tangible benefits brought by informatization, thus enhancing their confidence and determination in informatization. Lenovo Group never hesitates to announce the results of informatization to the outside world on any occasion-in 2000, the inventory turnover cycle was reduced from 100 days to 22 days, the backlog loss was reduced from 5% to 0. 19%, and the overall expense ratio of the company was reduced from 20% to 9% in 1995 .................................................. Because many CIOs don't record the "old figures" before informatization, the "new figures" after the statistical information system goes online, and they usually don't pay attention to collecting "typical cases" that illustrate the benefits of informatization, it is inevitable that they can't tell the benefits of informatization. After implementing IT projects, some enterprises have to entrust financial departments and even IT suppliers to evaluate the effect of system operation because they can't calculate the benefit of investment. Of course, it is difficult to produce convincing "evidence". IT department is the promoter of informatization, and the benefits of informatization are naturally completed by IT department or together with financial department. On the one hand, all quantifiable indicators should be quantified, and the old figures should be "frozen" before the implementation of informatization, and the "new" figures should be measured after the information system runs for a period of time. By comparing the old and new figures, it shows the effect of informatization, such as how much inventory has been reduced and how much delayed delivery has been reduced. On the other hand, for the benefit indicators that are difficult to quantify, in the process of informatization, CIO should pay attention to collecting "typical cases" of business departments, and use cases to illustrate the management changes and efficiency improvement brought by informatization to enterprises. Lenovo not only calculated the benefits of its informatization, but also accurately calculated how to recover the cost of IT investment. Now in the annual budget of each department of Lenovo, there will be an "information bit fee" of more than 380 yuan per person per month as the use fee of the mail system and office automation system; If the department is still using large-scale application systems, such as ERP system, it should also allocate the implementation, use and maintenance costs according to the return period of assets and the number of users; If a business department wants to launch a dedicated information system for its own department, all the implementation and operation costs of the system will be allocated to the operating costs of the department after five years, while the IT department only cares about the implementation of the project, and the business department pays the implementation costs, just like the business department has to pay the fleet fees for car use. Wang Xiaoyan, chief information officer of Lenovo Group, said: "All IT expenditures of Lenovo will be borne by all revenue departments of the company according to the revenue cycle. This is to let the business department know that IT resources are paid, just means, and the real output is created by business. " Of course, IT is still difficult for most domestic enterprises to bear the cost of IT investment by business departments like Lenovo Group, and most of the cost of IT investment is paid from the overall budget of the company, because if the business departments bear the cost of informatization in the early stage of informatization, many departments may give up or even refuse informatization.