Many businesses today face increasing pressure not to spend on IT — and more scrutiny in the form of a mandatory ROI analysis when you do. The flip side is that you can't afford not to invest.

Our current competitive environment demands improved customer service and operational excellence.

Distributors and manufacturers that place top priority on advancing their information systems, and giving customers, suppliers and employees the tools they need to make smart decisions, will survive and thrive.

If you're a mid-sized business, the battle is even more challenging. Mid-sized players have fewer resources to spend on IT in comparison to their larger counterparts, and cannot afford to take a false step. So what's a company to do?

Face reality. The slow economy, the unrelenting demands of customers, rising costs and the pressures of global competition are facts of life for the short term. Given this, precision ROI analyses are even more vital to the decision-making process for IT investing.

Creating an effective ROI study provides the decision framework for making process improvements — helping you define the metrics for tracking your progress toward meeting business goals.

The best ROI studies provide accurate assessments of a project's bottom-line results. ROI is extremely effective for discrete projects with quantifiable results — where the primary goals are reduced costs, improved service levels, lower asset investments, and productivity improvements.

As you begin the ROI process, you may need multiple measures since there is no universal method to measure or justify the value IT will provide to your unique organization. Begin by making sure you are solving a real business issue. Then you can simplify the possibilities by selecting a few key measures focused on management strategies and goals that contribute to the bottom line, and overall business success.

Here are some guidelines for implementing ROI analyses:

• Establish a budget for project management that includes an allocation to manage, research, define, audit, and track measurable project goals.
• Develop a portfolio of projects from corporate statements of strategy and objectives that can be rated using ROI techniques.
• Use ROI to rank projects and select those with the highest payback. Agree on measurable goals and designate an executive sponsor who will "own" the goal statement.
• Validate the project selection and goal metrics using an independent audit authority, and establish baseline measurements.
• Implement a prototype if project size is significant to validate the chosen technologies.
• Monitor project status regularly and make corrections as required. Do an end-of-project-review to evaluate project success and, if necessary, define follow-up steps.
• Modify budgets and financial incentives for departments and staff to link expected project results with impacted areas.

In the final analysis, ROI is an indispensable tool for justifying IT projects and enhancing enterprise business systems. When applied appropriately and accompanied by strategic thinking, it can assist in making optimum IT investments.