Regrettably, many CIOs, when pressed by CEOs, CFOs, etc. about the benefits of IT investments, can only answer in general terms by improving corporate efficiency, expanding the customer base, strengthening the management of branch offices, etc., and only a few CIOs can prove the value of IT with some simple calculation figures. How to calculate the return on IT investment? How to measure the return on investment (ROI) of IT? This is not only a new topic of information technology construction, but also a new topic that CIOs and CFOs need to **** face together. Hard inputs and soft returns Informationization construction is "real money" hard inputs, while the output is difficult to calculate the number of "soft returns", some returns can be quantified, some are difficult to quantify; some are short-term, some are long-term; some are financial returns, some are non-financial returns, some are not. Some returns are quantifiable, some are difficult to quantify; some are short-term, some are long-term; some are financial returns, some are non-financial returns, and some are social returns. To measure the input-output ratio of IT investment, it is impossible not to mention another concept TCO (Total Cost of Ownership). For a typical IT project such as ERP, CRM, SCM, etc., the total cost of ownership needs to be examined in five phases of the "lifecycle" of all the relevant costs: access to technology and systems phase, the realization of the phase, the operation phase, maintenance phase and update phase. Specifically, including six aspects: the cost of the planning period, including information systems market research costs, system requirements analysis of research costs, third-party management consulting costs, etc.; the implementation of the cost of the implementation period, including the preparation of basic data, personnel training costs, the system's prototype testing and parallel testing costs, system acceptance and evaluation costs, etc.; the acquisition of the cost of hardware and equipment, including computer hardware equipment (servers and terminals, network equipment, data storage equipment), the cost of software systems (software, operating systems, databases, implementation costs), and the cost of secondary development, etc. Subsequent service and maintenance costs, including the costs of system operation, maintenance, and software upgrades. Disposal costs in the closing period. Risk costs, mainly including the inherent risks caused by the selection of information system architecture, illegal invasion caused by poor system security design and disaster prevention measures caused by improper system crash and other external risks. Informationization construction is a hard input of "real money", while the output is a "soft return" that is difficult to calculate with figures. Information systems, especially management information systems to bring the return of a variety of ways to calculate, scholars at home and abroad also designed a variety of calculation models, but so far there is no one convincing way of calculation, because information technology to bring the return of some can be quantified, and some are difficult to quantify; some short-term, and some long-term; some are financial returns, and some non-financial returns, and some are social returns. Financial returns are mainly manifested in the reduction of inventory, reduce backorders, shorten the procurement lead time, reduce procurement costs, etc., non-financial returns are mainly manifested in the enhancement of the enterprise dynamic response to the market's ability to improve decision-making level. The benefits of e-government construction, in addition to improving the efficiency of the business sector, reduce office costs, etc., more social benefits, such as the "Golden Shield Project" for social stability, "Golden Quality Project" for the maintenance of market order, etc., is mainly a Social benefits, it is difficult to calculate the economic benefits. Due to the influence and constraints of various factors, the measurement of enterprise IT investment and return is quite complicated, far from being covered by a few financial statements. The following discussion focuses on the short-term and long-term return on IT investment, and the quantitative and non-quantitative evaluation indexes, in order to have a more complete and objective view of this issue. <! --######--> Short-term and long-term rate of return Some benefits of IT investment can be shown immediately, and some benefits of IT investment takes a long time to show. CAD, CAM and other simple needs, clear objectives of the IT project, the short-term results can be seen, such as how much efficiency, to complete the work of what could not be accomplished before, etc.; ERP, CRM and other large-scale IT projects, the return, it takes a long time. The return of large-scale IT projects, it takes a long time to be fully manifested. Such as a domestic enterprise ERP is very large, including finance, management accounting, sales and distribution, materials management, production planning, five modules and e-commerce and other parts of the entire implementation process in three steps: the first step is the implementation of the project, the second step is to promote, the third step is the overall optimization. The entire project is a huge investment, time-consuming and long-lasting, it is indeed difficult to see a certain stage of the implementation of a functional module for the enterprise to bring how much economic benefits; but in the long run, once these standards and uniform functional modules are integrated, this huge information technology system will not only bring the enterprise management leap, but also will lay the foundation of its business and international standards. Not only is the payback cycle of different projects different, but the payback cycle of the same project for different enterprises is also different. IT investment has a variety of purposes, such as reducing customer turnover, improving product design, reducing inventory, strengthening the management of branch offices, and so on, in the final analysis, it is to improve the enterprise's productivity and management efficiency. But on the assessment of "efficiency", different stages of the enterprise reference indicators will be different, in the survival stage of the enterprise of course requires a clear calculation of inputs and outputs, the pursuit of IT investment in the short-term rate of return; but for the cause has been on track, in the development stage of the enterprise, its return on the issue will look farther, generally not stick to the immediate return. Generally do not stick to the immediate rate of return, pay more attention to the long-term rate of return. Therefore, to measure the benefits of enterprise IT investment, we should fully consider the actual situation of the enterprise, because enterprise information technology itself is a continuous improvement process, which needs to be implemented in a gradual and step-by-step manner, and can not be achieved in one step. Quantitative assessment and non-quantitative assessment The results of informationization construction can certainly be measured, only the standard and form of measurement is not so direct, that is to say, it is difficult to use a clear, quantitative standards to calculate. For example, the addition of a PC can not see the direct benefits, but at least it can be done to replace some manual processes; and the establishment of ERP not only do not see a pleasing change, but also feel that the original order has been completely disrupted. It is difficult to find a completely objective standard to measure the benefits of information technology, but there are some quantitative and non-quantitative indicators can be used as a reference to assess the standard. ① Quantitative benefits - Reduce inventory (inventory occupancy, inventory capital turnover times, inventory errors) - Rational use of resources (shorten the production cycle, improve productivity, reduce the assembly area, reduce overtime) - Delivered on schedule, improve customer service quality (on-schedule delivery rate) - Reduce costs, reduce purchasing costs, reduce overtime, increase profits - Reduce the financial balance of payments errors, reduce financial losses and so on. ② Qualitative benefits - leaders and managers to grasp the market sales, production and financial operations - enterprise staff outlook and quality of a great change - managers freed from the processing of affairs, dedicated to standardization, substantive management - standardized management, product quality and its certain guarantee role. <! --######--> Sort out the benefits Before the implementation of information technology, CIO should first "freeze" the old figures, information systems run for a period of time, and then measure the "new" figures, to quantify the number of energy as far as possible; on the other hand, for the On the other hand, for the benefit indicators that are difficult to quantify, CIOs should carefully collect "stories" from the business sector, and use cases to illustrate the management changes and efficiency improvements brought by information technology to the enterprise. Although it is difficult to measure the benefits of IT investment with a set of evaluation system, CIO should still find ways to sort out the benefits of information technology, so that the management can see the real benefits brought by information technology to enhance the confidence and determination of information technology. Lenovo Group has never been shy about announcing the achievements of informatization to the outside world on any occasion - in 2000, the inventory turnover cycle dropped from 100 days to 22 days, the backlog loss dropped from 5% to 0.19%, and the company's overall expense ratio dropped from 20% in 1995 to 9%... ...Some CIOs, when asked about the benefits of information technology, can only answer in general terms to improve corporate efficiency, expand the customer base, strengthen the management of various branches, etc., and it is difficult to give convincing "evidence". Because many CIOs in the information technology before they did not record the "old figures", information systems on-line and did not measure the "new figures", usually do not pay attention to the collection of information technology benefits of the "typical cases ", it is inevitable to say that the benefits of information technology. Some enterprises in the IT project implementation is completed, due to their inability to calculate the benefits of investment, had to entrust the financial sector and even IT suppliers to assess the effectiveness of the system, of course, it is difficult to come up with convincing "evidence". IT department is the promoter of information technology, losing the benefits of information technology is also a matter of course by the IT department to complete or with the financial sector **** with the completion. On the one hand, to be able to quantify all the indicators of quantification, in the implementation of information technology before "freezing" the old figures, information systems run for a period of time, and then measure the "new" figures, through the comparison of old and new figures, showing the effect of information technology, such as inventory reduction On the other hand, for the benefit indicators that are difficult to quantify, in the process of implementing information technology, the CIO should pay attention to the collection of "typical cases" from the business sector, using cases to illustrate that information technology has brought about changes in the management of the enterprise and improve efficiency. Lenovo Group has not only calculated the benefits of its information technology, but also accurately calculated how to recover the cost of IT investment. Now, in each department of Lenovo's annual budget, there will be more than 380 yuan per person per month "information bit fee", as the mail system, office automation system costs; if the department also uses a large application system, such as ERP systems, but also according to the return cycle of the asset, according to the number of users to share the implementation, Use and maintenance costs; if a business sector to be launched only the use of the department's information systems, then all the implementation of the system, operating costs should be divided into five years all apportioned to the department's operating costs, while the IT department only manage the implementation of the project, the business sector to pay for the implementation of the cost, like the business sector to pay for the fleet of cars, as the same as the business sector to pay the fleet of cars. Lenovo Group CIO Wang Xiaoyan said: "All of Lenovo's IT expenditures, will be based on the revenue period to enter the business sector's costs, borne by all the company's revenue departments. This is to let the business sector know that IT resources are paid for, IT is only a means to an end, and the real output is still created by the business." Of course, the vast majority of domestic enterprises is still difficult to do like Lenovo Group, the business sector to bear the cost of IT investment, the cost of IT investment in most of the company's overall budget is still from the expenditure, because in the initial stage of information technology if the business sector to bear the cost of information technology, many departments may give up or even refuse information technology.