The confusion of ROI calculators

Our expert explains the tricky task of calculating return on investment (ROI) and why online vendor calculators shouldn't always be trusted.

Defining return on investment (ROI) from an IT project or from introducing a new technology can be a tricky task. On leaving your meeting, the vendor or reseller sales person may cheerfully suggest that the "true ROI can be easily established using the calculator on our website." For many, this may be true. For many more, it is not. ROI is one key aspect of an investment decision that could decide or define a CIO's future if not the company they work for.

Using a vendor calculator is fraught with difficulty. Following a series of meetings I have attended where this subject was highlighted by the prospective customer, four continuous themes emerge.

Firstly, the vendor who produced the calculator will have probably tuned the equations to best suit their product. Therefore, they are not to be fully trusted.

Secondly, if a CIO is to take a balanced and objective view of the available offerings, then a series of calculators will need to be used to enable a comparison. Time is a precious commodity and it is in short supply.

Thirdly, each calculator may ask for a slightly different piece of information that may not be readily available. Again, a time objection sits in the way. Finally, even if all this time and effort produces a comparison table that a CIO could trust, will anybody else?

Leaning on the vendor or value-added reseller to produce such work is not the answer either. The vendor will simply guide you to resource areas on their Web, or possibly over to the reseller you have engaged. The reseller is left in a similar position to the CIO, questioning whether the time and effort investment to produce a ROI comparison document at such an early stage of the sales cycle will reap a reward.

When combining this with the suspicion a seasoned sales person will have as to how appropriate a vendor ROI calculator is to their customer requirements, the ROI question becomes difficult to answer. For example, in a recent Hewlett Packard (HP) accreditation exam, a question offered four timeframes to see an ROI from a HP networking investment. The correct answer was less than six months. Yes, I got the answer wrong.

How about outsourcing to a third party?
Another approach is to outsource this task to a third-party, or to use a third-party financial modeller. A quick Google search will uncover consultant companies, like Nucleus Research, who provide a range of services in this area.

Although they aim to charge for their services, a good Google search will uncover downloadable spreadsheet models for potential customers to use. However, they may not tightly fit the project you have in mind. So perhaps the answer here lies in a more innovative approach.

For several years, I have been helping customers build an ROI justification for desktop virtualisation that meets three criteria: technical, operational and business.The technical view covers the impact on physical resources in the data centre; the operational view covers reductions in support time and increases in user uptime; and the business view summaries the qualitative and quantitative benefits. Much of this is common sense, engages the business and uses readily available information.

For example, the technical view is a simple spreadsheet that calculates the cost per user per month over an agreed period. The cost per server with its virtualised operating platform, power/cooling and support costs can be assumed as broadly the same regardless of the desktop virtualisation software being used.

Costs for the virtualised software and VECD payment are easily obtained from your supplier. Finally, a calculated assumption on the number of users per server can be made based upon knowledge of the applications to be virtualised and the experiences of others. With some simple spreadsheet functions, a comparison of available options can be produced in the knowledge that both the underlying cost assumptions and the equations used are not biased deliberately in the favour of any particular vendor.

Creating a proper cost comparison
By applying the same logic to include the existing client/server environment, a cost comparison between desktop virtualisation vendors and the current environment can be created. This isn't rocket science, and it gives credibility to the numbers that are supported by the company's experience and not vendor assumptions.

With a grip on the numbers and the cost of ownership over a fixed period, a more rounded view needs to include the operational impact. With desktop virtualisation, financial return often excludes increased user productivity and focuses on reduced support cost. With the desktop centralised in the data centre, it is easy to see how the resources required for user support can be reduced.

However, the productivity of the user can increase considerably, too. When I mention the "coffee boot" (where a user switches on their desktop and, while waiting for their PC to boot, can make coffee, update their colleagues on last night's news, unpack their sandwiches, etc.) to a CIO, a wry smile appears. Those five-to-ten minutes as a total for the user base across a year adds up and becomes released as work time as the thin client device immediately boots.

Vendors are helping here too. For example, Citrix includes a feature called Dazzle in XenDesktop which allows for user deployment of software applications to their virtualised desktop. Implemented correctly, this removes the need for IT to be involved in application installation and gives users added work flexibility.

Finally, the defined savings these exercises show will assist in defining the financial elements of an ROI for individual companies. If this is combined with performance enhancements measured through pre-agreed metrics with department heads, then a more rounded and appropriate approach to an ROI calculation can be achieved.

ROI is important, as CEOs want to ensure that any investment made in the current economic climate will bring definable benefit. They want to see how they, by introducing a technology like desktop virtualisation, can benefit their business and extract maximum value. Using a vendor ROI calculator may overlook the individual company and give the broader view.

Today, that approach is simply not good enough. The investment in time required to produce a tailored ROI document highlighting the technical, operational and business benefits using in-house calculations will in itself provide a return by producing a credible document.

Andrew Cross is the sales director at reseller Sol-Tec and a contributor to SearchVirtualDataCentre.co.uk.

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