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When ROI is Overkill


By Simon Galbraith
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May 1, 2004 —  (Page 1 of 3)
Return on investment (ROI), risk analysis, requirements analysis, alignment with strategic objectives-it's a given that these methodologies should be used for judging the merits of a software investment.

So, why do our hearts sink at the prospect of doing these analyses? The answer is simple: They don't work. Oh, they might be fine for big-ticket enterprisewide software, but for lower-cost software these heavyweight techniques don't work for several reasons.

One is that predicting the value of an uncertain asset over time is counterproductive when it can more easily and accurately be demonstrated in a trial.

Another is that analysis processes often introduce "paralysis by analysis" into organizations; people are unwilling to invest time and effort into getting something approved. In many cases, the ROI predictions are often incorrect due to errors in assumptions or calculations. Also, a predictive approach encourages bloatware, with large unnecessary feature sets satisfying a requirements analysis but not necessarily benefiting users.

Imagine you've used a product intensively for two weeks and found that it meets all of your requirements at a reasonable cost. It would be pretty galling then to be told by some manager to try out three similar products, write a report and make a presentation to top managers.

An evaluation is a far more productive use of resources than a prediction, which often relies on false or exaggerated claims from the vendor. The best way to determine a technology's potential and value is to put it to the test in your environment.

Paralysis by analysis. The company I work for sells software tools for software developers, DBAs and application testers. The people interested in our products are intelligent, highly trained and generally well paid. They work on projects that involve spending hundreds of thousands, often millions, of dollars. You would think that they'd have little difficulty justifying the purchase of inexpensive tools.

Wrong. Often developers, DBAs and testers can order software only after they jump through lots of time-consuming hoops to justify the purchase to management. Not surprisingly, some don't bother going through the laborious requisition and evaluation process, despite really needing the tool; the process is just too painful. I pity the folks working in government departments and large multinationals, who often tell us that they need the tool right away but can't get it approved for another three months.



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