Analyzing the Return on Investment

Definitions and Methodologies

The Economist provides a dictionary of economic terms and financial metrics such as ROI, payback period, NPV . . .

A CIOview white paper on the terms and their meanings - TCO, NVP, EVA, IRR, ROI - Getting the Terms Right [PDF Format, 289Kb]

Pros and Cons of ROI Analysis

Often the greatest benefits from an investment in e-business technologies are the intangibles. However, the ROI calculation requires all benefits in numerical terms. Quantifying these intangible benefits (e.g., improved employee satisfaction) is currently more of an art than a science, and thus, legitimate questions about the final numbers and the integrity of the ROI analysis may be raised.

• ROI Calculators: Honest projections or fuzzy math? - Not all ROI equations and tools are the right fit for your business. This article warns you of a few things to look for before choosing a way to project returns for your project.
• L'importance et la difficulté de mesurer le rendement du capital investi d'un portail d'entreprise (in French only) — Many companies are reluctant to build a Web site because they feel they lack the required expertise. By carefully planning the deployment, valid ROI indicators can be defined.
• Du bon usage du retour sur investissement (in French only) — ROI is the primary yardstick for business projects. However, danger awaits those who blindly use this important but simplistic measurement.

Pros

• CIOview's white paper on the Business Benefits of Utilizing ROI Analysis
• ROI Diligence Yields Rewards from Computerworld

Cons

• Where ROI Models Fail
• Damn the ROI, Full Speed Ahead by Mohanbir Sawhney - an CIO.com article outlining some of the pitfalls of ROI analysis.
• Mark Gibbs of Network World wonders . . . How Meaningful are TCO and ROI?
• ComputerWorld looks at The Fuzzier Side of ROI