ROI

March 1, 2012

Return on Investment

Okay, let’s face it; all of us would like to have return on our investment especially if it concerns personal money matters. ROI is more than that and it applies to many aspects to day to day life and business. ROI is a perform measure used to evaluate the efficiency of an investment. ROI also has social application which is used by municipalities and other government entities. (1)

Let’s look at governments who for decades have invested heavily in the billions of dollars in IT and have measured the performance of IT initiatives with quantifiable, financially based outcomes, such as reduced transaction costs or cost avoidance. Financial measures should be used in government, but they seldom represent the full range of returns generate public investments in IT. Most agree that based upon well-grounded measures, IT in many ways with its programs and services have been more effective and less expensive as a result of the investment. The US government on a yearly basis has been tightening its belt by reducing funding and why is that? Some in congress are not convinced that IT is the answer in its current venue and it needs to be revamped to better serve the public, such as increased security or transparency. This has created a challenge and hard to measure. For governments "Value creation can therefore come as much from increasing the integrity and transparency of government as from reducing costs through activities such as online tax processing, license application and renewals, obtaining information, filing forms, etc. The public value propositions for these investments go beyond the important but obvious cost and time savings to include attention to service quality, access, and equity, to name a few. This take on value also includes many stakeholders, each with special interests and expectations from government; many kinds of public interests require an expansive way to view public value." (2, 3)

So in the meantime the US government has made strides in the past five years for its citizens by allowing for government documents to be downloaded easily reducing the amount of government time spent on fulfilling Freedom of Information Act (FOIA) requests. The government voluntarily puts data on its website (proactive disclosure) and makes it easy to use; citizens/reporters can find the information on their own, without needing to fill out a FOIA request. Clerks (and others) who work on fulfilling FOIA requests become enabled to spend their time working on other tasks. This in turn this has provided the government return on investment. Even the Canadian government has followed suit by proving its citizens with something called the Open Data and has saved over $3.2 billion. Canada had help from its citizens acting as proactive police to data being published. Bringing issues with data provided many illegal operations within the county which were stopped and money saved to the tax payers. (3, 4).

It’s not that ROI is not expected by everyone but sometimes it is not readily recognized immediately and it could take years for investments emerge. Many governments including the US government which has invested many billions of dollars, as a matter of fact almost $70 billion as late as 2010 with a projected increase of 3-5% annually expects to see some type of ROI on it $70 billion. (4, 5)

Dan Prabhu

Sources:

http://www.investopedia.com/terms/r/returnoninvestment.asp#axzz1nryoo5gf

http://www.ctg.albany.edu/publications/issuebriefs/proi

http://www.eida.gov.ae/userfiles/Public_Value_and_ROI__in_Government_Projects.pdf

http://www.govloop.com/profiles/blogs/governments-roi-for-open

http://eaves.ca/2010/04/14/case-study-open-data-and-the-public-purse

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2 Responses to “ROI”

  1. Siddharth Sehgal said

    I like your post Dan. You have very sound refrences, especially the govloop.com article. It was very informative. Thanks for posting

  2. Vishnu said

    Good post, I like the style of presentation and you references.

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