Forget ROI

A cartoon in a recent issue of The New Yorker depicts the classic scene of a father sitting in a chair, looking over the report card his young son has handed him. The father says, “They may be your grades, but they’re the return on my investment.” CIOs are hearing similar sentiments when they face their CEOs, perusing a list of corporate IT projects.

It’s a lot less funny but at least as silly.

Because just as no child’s education can be seen strictly through the narrow prism of “investment,” IT operations can’t be judged solely on hard numbers. Anyone who tells you otherwise isn’t seeing the big picture.

If you’re jumping through ROI hoops for every IT project on your whiteboard these days, you’re wasting your time. It may sound ironic, but the simple truth is that there’s no ROI in analyzing the ROI on everything. At the risk of being labeled a blasphemer, I suggest you rid yourself of the fancy-schmancy, spreadsheet-happy blather of ROI gurus and use your own wisdom to evaluate IT projects.

If it makes sense to you, do it. If not, don’t. You know the business. You know the technology. You know your crew. You know your budget. You know if it’s feasible or not. What else do you need? A report card for Dad? I think not.

I’m not saying that just because you’ve got a lofty C-level title and a few years in the industry, you can fly by the seat of your pants. But who knows better which projects have been well conceived, which are half-baked and which deserve never to see the light of day? If you can’t make that call, you should look for another job.

After all, your company depends on progress to succeed, and you’re in charge of systems that support that progress. Your company’s success is utterly dependent on smart people like you who take risks. In a best-case scenario, an ROI analysis is a stall tactic for undeserving projects. Worst case, it’s a rationalization for undeserving projects. In effect, ROI analyses justify rejections to division managers or failures to stockholders and venture capitalists.

ROI activity is risk-averse. That makes it ideal in an era when CEOs are listening to their lawyers and accountants more often than they’re listening to their CIOs, CTOs and VPs of engineering. If you’re a fan of the Lord of the Rings saga, you’ll know what I mean when I say that Wormtongue — the master of calculating the virtue of caution to the point that opportunities are lost — is the master of ROI. Meanwhile, Gandalf, the advocate of risk and a wizard who rules over what passes for progress in Middle Earth, intuitively understands a situation and knows when to act.

The best, most innovative IT improvements have no ROI. There was no decent ROI on installing the first Wang word processor in the 1970s or the first PC to run VisiCalc in the 1980s or the first Linux server for corporate Web sites in the 1990s.

But the people who took those risks pushed their companies ahead of their competitors and made working there better, improving the lot of their employees and, most likely, attracting more talented individuals who brought even more progressive ideas with them. If we let the ROI Wormtongues rule the day, this decade will never see an analogue to the technological achievements of past decades.

The best CIOs understand the political necessity of living through the latest management craze. ROI is the trendiest of the lot today, so you know it will be tough to stand firm against the rising tide of ROI demands. And I suspect that many of you won’t be able to avoid having to submit one mind-numbing report after another.

But when everyone jumps off the ROI bandwagon, your company will still need to depend on your instincts, knowledge and experience. Those attributes got you where you are today, and they, not ROI theory, will be the basis for the best IT decisions you can make. Because wisdom can’t be reduced to an ROI calculation.