ROI calculations done right can help IT projects

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Building a solid business case for your IT projects means nailing the financial calculations and language. Making accurate ROI predictions can pay off

Several years ago, Todd S. Coombes proposed a project at a company where he was then CIO. "It was a legacy modernization of some of our older systems and data conversion to the newer platform," he recalls. "It was very important to IT."

But his proposal had to compete against hundreds of other uses of the company's capital, measured against time to payback. "A lot of companies like to do projects if you can get an 18- or 24-month payback," says Coombes, who recently became executive vice president and CIO at ITT Educational Services, a post-secondary educational company based in Carmel, Ind., with 140 campuses around the country. "A lot of these legacy data conversions will have about a seven-year payback, and that's not so great."

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The first year that Coombes proposed the project, it was rejected in favor of others with better ROI. The next year, he proposed it again, and again it was rejected. But the third year, he got the go-ahead. What had changed? "In that second year, we had some major, business-impacting outages that were a result of not having done this project," Coombes says. "I explained that it was just the tip of the iceberg of what could happen if we continued not to address things that needed to be addressed just because they didn't match the hurdle rates we were trying to achieve. I think it was eye-opening for a lot of our business counterparts."

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