Technology Paper -- Return on Investment

Return on Information Technology Investments

Reinforcing the importance of reengineering is research illustrating that the return on investment (ROI) from information technology investments varies directly with the degree to which the technology transforms core operations.

Phases and Returns of Technology Investment(17)

Phase I Technical Proficiency: Installation and training. Negative return on investment is expected as up-front costs are incurred.

Phase II Task Automation: Technology-driven vision focusing on personal productivity at the task level. modest 10-20 percent return is expected as tasks such as word processing, project management, forms generation, basic statistics are automated. Although successful completion is formidable challenge, benefits rerely justify major technology investments.

Phase III Business Process: Tactical business vision drives use of technology. Returns of up to 300 percent are expected as technology is used for integrating project management and financial systems, providing constant and current executive information, and providing direct customer access from remote locations.

Phase IV Business transformation: Strategic business vision drives restructuring of business processes using technology. This, the true "Reengineering" phase, offers almost unlimited returns on information technology investment, as businesses move to eliminate unnecessary tasks and use: just-in-time scheduling, joint marketing partnerships, intra-industry partnerships and seamless integration with suppliers and customers.

**Phases and Returns of Technology Investment(17)**
Phase I	Technical Proficiency: Installation and training. Negative return on investment is expected as up-front costs are incurred.
Phase II	Task Automation: Technology-driven vision focusing on personal productivity at the task level. modest 10-20 percent return is expected as tasks such as word processing, project management, forms generation, basic statistics are automated. Although successful completion is formidable challenge, benefits rerely justify major technology investments.
Phase III	Business Process: Tactical business vision drives use of technology. Returns of up to 300 percent are expected as technology is used for integrating project management and financial systems, providing constant and current executive information, and providing direct customer access from remote locations.
Phase IV	Business transformation: Strategic business vision drives restructuring of business processes using technology. This, the true "Reengineering" phase, offers almost unlimited returns on information technology investment, as businesses move to eliminate unnecessary tasks and use: just-in-time scheduling, joint marketing partnerships, intra-industry partnerships and seamless integration with suppliers and customers.

Task automation of functions such as word processing and case management achieves a modest ROI (10 to 20 percent) from the increased speed of the task. An example is automating a court's case docket so that the clerk can look up information faster. The next phase occurs when information technology is applied to a business process rather than a single task, and can return up to three times the investment cost (300 percent). Using the same example, information technology is used to provide direct public access to court records, eliminating the need for the clerk to be involved in retrieving the information. Michigan's 36th District Court gives users direct access to court records by integrating its on-line records system with a touch tone telephone system, and Oregon courts now provide public access terminals that allow anyone to "see" court records.(18)

Business transformation occurs when technology is used to restructure the core business itself, to innovate rather than automate. The potential ROI is almost unlimited. Utah state courts have embarked on an experiment which will require all court case documents to be filed electronically. All necessary data will be extracted and entered into court records automatically, and rule-based software will perform scheduling and work routing. Electronic filing yields important benefits: data entry is transferred to the document creator; the courts and its customers no longer have to pay for mail or courier service; and "hypertexting" legal citations to an on-line database simplifies legal research.(19) Equally important, the court's customers will acquire a research capability not previously available, meaning that the courts will have improved the quality of its service as well as having reduced its cost. It also means that the court system will have greatly expanded its caseload capacity with little or no increase in staffing.