Measuring ROI to Understand How Your IT Department Is Helping Your Business

Whether your IT department consists of a single employee, a small team, or an outsourced MSP, it’s easy to overlook the impact it has on the profitability of your business. An IT department is often treated as a necessary expense or a safety net that doesn’t necessarily help a company generate profit the same way other departments do.

How IT Can Help Your Business Make Money

However, in a world where every company heavily relies on technology, a great IT team can actually pay for itself.

How IT Can Pay for Itself

Think about the stack of hardware and software you and your employees rely on each and every day. Any time you have to add new platforms to this stack, or any time you migrate to different platforms, your costs can increase significantly. In order to keep these costs down, it’s essential to regularly review what licenses and services you’re paying for and to eliminate any redundancies.

Forgotten, redundant services are one of the most common ways businesses incur significant–and completely avoidable–costs.

Consider a commonplace scenario where your business is paying for Microsoft 365 licensing as well as an external service to host your documents and files. Not only do you pay for this extra service, but your employees must log into a separate service and use a separate program to save their documents.

Any good IT company, like Wizard IT, would propose an operational change. Since your business has Microsoft 365 licensing, each employee already has their own cloud-store via OneDrive that can store and backup their documents. Any operational documents can be migrated to SharePoint, a collaboration platform from Microsoft that aims to fill this exact gap. Making this change eliminates the expensive extra server and its monthly costs. This also shifts your business toward a fully integrated platform under the Microsoft umbrella, enhancing reliability and productivity.

This is just one of many ways a good IT department can save your business money while simultaneously boosting profits via more streamlined operations.

Why It’s Important to Measure ROI for IT

Just like with any business investment, IT projects must be financially feasible for the company. Measuring the expected ROI for IT projects not only helps justify the investment, but it can also be used to evaluate the project in hindsight.

However, there are plenty of IT projects where measuring the ROI isn’t useful or possible. Replacing broken PCs, minor maintenance projects, or regulatory/compliance projects are all relevant examples.

Excluding those instances, calculating the ROI for IT projects is the best way to know if you’re using your resources effectively. Here are some examples of IT projects that will deliver measurable ROIs for your business:

Revenue Improvement: Providing a service that increases sales, both for existing and new customers.
Cost Reduction: Implementing technologies that effectively lower maintenance costs or reduce employee travel frequency.
Cost Avoidance: Saving time due to increased productivity on tasks, a reduction in the number of processes or customer interactions, or fewer instances of human error.
Capital Reduction: Minimizing the costs of storage and servers.
Capital Avoidance: Eliminating the need for an additional data center.

Of course, IT projects can also generate intangible benefits. These benefits aren’t easy to measure, so they can’t be included in ROI calculations, but they are still worth mentioning. For example, increased customer satisfaction, improved usability, and better forecasting are all worth mentioning when explaining the need for a particular IT project.

Calculating ROI for IT Projects

If you want to start calculating the ROI for your IT projects, follow these steps:

Identify the Investment
To get started, you must identify all of the expected costs related to the project. If the project is implementing a new software, for example, think about all of the associated costs. This will include licensing, employee training, annual support, and any in-house costs necessary for continual operation. Each cost should be easily measurable to ensure an accurate and detailed estimate.
Predict the Return
The profit generated by an IT project is more difficult to predict. To continue our example from above, review the software and record every aspect of the business it will impact or influence. New software implementations typically help improve business processes or even automate certain tasks.
Calculate the Expected ROI
ROI = (Return/Investment) x 100
Use this equation to measure the ROI of your next It project. Accuracy is important, but you can also use this equation to estimate the best- and worst-case scenarios. This helps you better understand the risks of the investment.

Don’t Let IT Hold You Back

You should always calculate the expected ROI of an IT project before you decide to move forward. If this isn’t something you’ve been doing, it’s time to review your more recent IT projects to understand if they’ve been effective and profitable.

If your IT department isn’t helping your business increase revenue, improve efficiency, and boost productivity, then it’s holding you back. If this is something you’re experiencing, then it’s time to ask yourself: “Is it time to rethink our IT strategy?”

Frequent downtime and a variety of productivity issues are common signs of IT issues. Whether you need to fix, adjust, or replace your IT service, Wizard IT is here to help.