| 1 Calculate the monetary value of IT initiative benefits |
| Outputs | Benefits | Monetary value |
| Increased productivity | Increased profits from new customers (number of new customers (50) X average customer profitability ($1,200)) | $60,000 |
| Time savings | (2 hours per week 3 50 work weeks in a year X average labor cost per hour ($40) X 100 employees) | $400,000 |
| Increased capacity utilization | Cost savings | $50,000 |
| Improved quality | Increased on-time deliveries reducing cost of grievances | $10,000 |
| Direct IT cost savings | Reduced hours of system downtime (10 hours saved X average labor cost per hour ($40) X 100 employees) | $40,000 |
| Channel optimization, customer loyalty value creation | Increased profits from existing customers (increased average existing customer profitability by $1,000X 310 customers) | $310,000 |
| | Total benefits | $870,000 |
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| 2 Calculate the total cost of IT initiative |
| Costs | | Monetary value |
| Front-end direct costs of IT initiative | Hardware, software, installation and configuration costs and overhead | $350,000 |
| Disruption costs related to human factors | Hours lost because of IT training (5 hours per factors employee X average labor cost per hour ($40) X 100 employees) | $20,000 |
| Disruption costs related to organizational factors | Technical disruptions, resulting in lost orders and lost customers (20 customers X average existing customer profitability ($1,200)) | $24,000 |
| Costs of risk mitigation | Development and implementation of IT performance framework | $6,000 |
| | Total capital costs | $400,000 |
| Operating costs of IT initiative | Direct IT operation costs, maintenance costs ($2,500 per month X 12 months) | $30,000 |
| | Total operating costs | $30,000 |
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| 3 Calculate the IT initiative of ROI |
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