Exhibit 3  Examples of an IT ROI
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
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
3 Calculate the IT initiative of ROI


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