Comments on: Can you get ROI from reduced costs?

By: Pete Lindstrom

Pete Lindstrom — Wed, 05 Nov 2008 02:00:15 +0000

@Richard -

It is certainly reasonable to believe that ROI is not very useful in many circumstances. I submit that in most cases, however, you are not going to have a choice about whether to use it or not – it will be dictated by bosses. In those cases, I don’t think it would be “stupid” I think it would be the intelligent thing to do.

Pete

By: Richard Bejtlich

Richard Bejtlich — Sat, 01 Nov 2008 19:38:01 +0000

From the link:

“What it also illustrates is that, originally, ROI was a measure of return on the total investment in the entire business, not the ROI of a project or a product or a training course or any other isolated aspect of a business.”

That is why calculating “ROI” for buying a security product, HR process improvement, janitor staffing change, etc., is still stupid.

By: Nick Owen

Nick Owen — Mon, 15 Sep 2008 19:05:39 +0000

Interesting that the original formula included return on investment. ROI is, IMO, not a very good measure. Perhaps because of how it is defined these days. My first blog post discussed these issues:
http://www.wikidsystems.com/WiKIDBlog/1

Perhaps it is time to pick it up again…

nick

By: Lori MacVittie

Lori MacVittie — Fri, 12 Sep 2008 19:49:48 +0000

Good question and I love the topic. We used to argue about this at the magazine all the time when coming up with ROI charts.

Reduced costs seems to be often measured in terms of the costs saved from a reduction in manpower. So if a solution reduced a 4 FTE job to a 2 FTE job, then your cost reduction is the salary + benefits of 2 FTE.

It gets even better when you start trying to measure productivity increases as part of an ROI equation…

I guess these things have to be done, but I’m sure glad *I* don’t have to do them.

Lori