How to make an IT modernization business case

  • Posted on June 12, 2017
IT modernization business case

Big IT modernization projects require a big investment. To justify that big investment requires a business case that demonstrates a worthwhile return on that investment. Nothing new about that.

What has changed is that IT no longer holds all the IT budget.

It’s now increasingly also in the hands of the business leaders that run line of business functions like marketing, operations, finance, sales, HR etc. These business leaders typically understand the value of IT as it relates to their part of the business e.g. marketing wants a digital marketing platform and would support the purchase. However, when it comes to complex modernization projects, requiring investment from all parts of the business, research recently sponsored by Avanade shows that 87% of senior IT decision makers believe that their organization’s execs could better appreciate the potential ROI of IT modernization projects.

Just how do you go about showing the business ROI is there? You have to think beyond IT. You need to start to incorporate the benefits to the business, in terms of aspects like increased business user productivity (not just IT productivity), reduced business operations costs (not just IT costs) and increased business revenue. Key performance indicators (KPI’s) are critical to that. Demonstrate that your business users are able to process more of X which means the business has sold more of Y.

It’s simple in writing, but it’s not easy. Avanade has the same problem when showcasing the business value of the managed services we deliver to our clients. Increasingly our clients are turning to us to help them with their digital transformation journey as part of an ongoing managed service. We need to be able to demonstrate the business value we are delivering them, so we turned to the research firm IDC for help. They spoke to a number of our enterprise clients, varying in size, industry and location, and delivered an ROI model for Avanade that demonstrates the business value our managed services deliver. The results are impressive:

  • A 433% ROI over 5 years
  • Payback in 10 months
  • $6.38M of additional revenue per year per organization in improved business results and reduced impact of downtime

These are big numbers because the ROI model doesn’t just take into account the IT ROI, it critically also takes into account the business ROI. This means, for example, it captures the additional business revenue created because an eCommerce platform is now more reliable and has new features added faster, that in turn enables more revenue to be generated.

Avanade can now demonstrate an independently validated business ROI to the CIO’s that have contracted our managed services. Those CIO’s can now show that same data to the rest of the business executives to show the business ROI impact. Those business executives see that and who knows, they may just feel more confident in investing in IT projects. I call that a win-win.

Hear what IDC Research Director Peter Marston has to say in the short video below.

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