Seven foolproof ways CIOs can determine ROI

At any given time, CIOs manage thousands of technology assets. If one asset breaks or a capability is missing in the value chain, it causes friction for everything else — costing money, time, and potential innovation. 

Every capability must work as seamlessly as possible together. And with today's ever-expanding technology stack, that’s an increasingly complex and daunting task to undertake.

So, as a CIO or technology buyer, how do you choose which are the best capabilities to invest in? I've spent three-plus decades learning this craft, and here’s my list of seven non-negotiable questions to ask.

Is it aligned with your strategy?

To guarantee a good return on investment (ROI), your first and most important step is to ensure that the new capability has clear business outcomes directly aligned with your company’s strategic imperatives. And by capability, I mean software, hardware, or a combination of both. Also, is there potential for broader alignment with other company goals? If so, that’s a tick. 

Is it aligned with business outcomes?

Beyond your company’s strategic imperatives, ensure there’s strong business alignment and sponsorship. Does this capability do everything you need it to do (both now and in the future) for the functional leaders and teams who will be using it? This can get tricky.

When you start talking to functional leaders, they may not always know what's possible in terms of technology and its different capabilities. Helping business leaders to connect digital and business challenges is the business-partnership aspect that CIOs bring to the table where they say, “Hey, it’s really interesting how you're doing this, but did you know this is possible?” 

Alternatively, you may need to bring in other functional leaders to make sure the capability you’re investing in also solves their use cases and doesn’t break their current business process. So, a solution must first have broad alignment, and then it must have deep functionality.

How long before it delivers value?

Whenever you buy software, the ROI clock starts ticking from the day you sign the purchase order. If it takes you a year to deploy, you’ve lost a year of value and eroding the initial momentum and support behind the purchase. 

When making a purchase, you also need to consider the total cost of deployment. Costs associated with any professional services, if you need to hire system integrators, or if extensive training is required — all of these things take additional time and money. Remember, it’s not just the cost of undeployed software that impacts your ROI. It’s also the opportunity cost of not having deployed a live capability.

What’s the total cost of ownership?

Hand in hand with time to value is total cost of ownership (TCO). I’ve seen organizations calculate ROI based strictly on the cost of the software or service, but I always ask about the ongoing costs. People come and go from companies. When someone new comes in and they’ve never used a capability, they likely need to be trained. That’s an additional cost. This is also why low-code, no-code software wins — users can quickly and easily start seeing value. 

In addition to training, you should consider ongoing operational and administrative costs and the costs of future updates, upgrades, and enhancements. This is where cloud deployments win, but you still need to plan and manage these changes.

Is it a platform?

Imagine this: You’ve done all the compliance checks — GDPR, SOC, ISO, and so on. Your legal team determined where the data was residing and deemed the vendor and solution viable, but eventually you realise that vendor doesn’t have all the functionality you needed, and you have to find another piece of technology that fits with your solutions and go through the entire cycle again. What a nightmare. 

If you bought a platform, you could’ve covered all that ground in one go. Buying a platform is much more than avoiding long and expensive purchasing processes. Great ROI and platforms go hand in glove. When a capability comes online, you want to benefit from that innovation rapidly. With a platform, vendors can quickly deploy new features and functionality, and you don’t have to worry about more paperwork, lengthy deployments, or (potentially) additional licensing costs associated with the latest technology bolt-on. 

Generative AI is a great example of this in practice. While technology vendors are bringing these capabilities to market, some are adding new SKUs to existing platforms and delivering these at additional cost. Savvy CIO will push back at the last item, but how do we subtly change this practice?  

Does it have flexibility and scale?

A capability must fit into your shared services models, and it must be flexible – multi-cloud and hybrid environments. This is truly where modern cloud solutions are winning. If you have a solution in the cloud or one that can connect to data from anywhere and it clicks into your current stack, then you don't have to do custom work to make that happen. I’ll prioritise a solution that's slightly less functional but still creates the business value I’m looking for if it quickly snaps into my stack and gives me extensibility, flexibility, and scale. 

Is there friction?

Sometimes, functional leaders think it’s no big deal if they buy ‘just one more’ piece of software. After all, it’s going to save them an hour a week! But if that software breaks one thing in the value chain and it creates friction for others, it becomes a recurring, negative value. Very few capabilities run in isolation without cross-functional support from HR, legal, procurement, and IT.  

All CIOs know the terrible pain of having something break in the life cycle of their technology — we experience this many times a year. If we’re being distracted by some weakness in the value chain, it takes us and our team away from innovating. 

Ongoing ROI assessments

But the journey doesn’t stop there. After you’ve made an investment, it’s important to continually assess your capabilities for ROI — especially during a downturn. Unnecessary software should be one of the first things to go when your budget is under pressure because every dollar you save on software is one less dollar you may have to optimise elsewhere. 

So maybe your business overbought, or they have redundant capabilities. Functional leaders will come to you during a downturn and say, “Hey, my budget is being crushed. What should I do?” If you have a trusted relationship (which you should always be building), you can partner with them to determine which capabilities have the best ROI and which should be sunsetted. 

Today is the best time to get rid of any vanity purchases. They're not driving the ROI you expected — and that’s okay. Sometimes organisations buy things with big expectations, and it's a failed experiment. The sooner you turn something off and admit it's no longer giving the return you expected, the more you’ll save and the better your organisation will perform. 

Remember, it's easy to buy something. It's hard to get rid of something people have gotten used to. 

Looking ahead

While diligent CIOs plan ahead and make informed purchasing decisions, we’re constantly faced with new innovations, and I say “faced with” because it’s a constant variable that’s both exciting and somewhat unpredictable.

But here’s the secret. Even the best CIOs will tell you that while their roadmaps for this year are solid, they’ll get it about half right the following year. Innovation is just coming too fast. So above all else, ensure you have technology that can catch what you didn’t anticipate. 

When you make your next investment, make sure it's flexible and built for scale in multi-cloud and hybrid. Find platforms that give you compounding ROI by quickly deploying new features. ROI on your investments isn’t just what you have now; it's how your capabilities fit and perform moving forward.

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