No Jitter is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Focus on IOR, not ROI

The UC and IP-PBX industry has, for years, focused on ROI. But if you look at the vendors' revenue growth rates, the results have been less than stellar.

The reason is certainly not a lack of opportunities that will produce a high return. Hundreds of case studies show that high returns from UC are available, when an organization is willing to change how they do business.

Rather, the problem appears to be that the emphasis on ROI is misplaced. Vendors consistently focus on high ROI from investments in their products and services, rather than focusing first on the returns available to the customer. In other words, the marketing campaigns start with the proposition that the customer should buy their entire new whiz-bang product line and then start counting all the places where the customer can find some positive returns to pay back and then deliver returns on that huge up-front investment.

Of course, the vendors' sales forces and channel partners also follow this approach. Pricing reflects this approach, with emphasis on bundles that include all of the system capabilities and features rather than allowing the customer to easily buy only what they need to obtain their targeted returns.

So, the approach of, "Let's use our ROI tools to figure out how much return you can get after buying our entire proposal," is not the best. Often the front end investment is so high that the ROI is essentially zero. One major vendor recently announced proudly that their IP-PBX would generate benefits that would pay back the original investment in just 5 years! Let's translate that to ROI: Even assuming 0% financing, if you pay back an original investment in 5 years, the 5-year ROI is ZERO percent (0%)! Not very compelling. A new conveyor belt or another delivery truck or just leaving the money in the bank would probably be a better deal.

So, is there a solution? Here's a suggestion: Switch the focus from ROI to IOR--Invest On Return.

The IOR approach starts with a customer clearly identifying the return, or menu of returns, that the organization is seeking to achieve. Is the goal a shorter sales cycle? Is it faster time to market with products and promotions? Is the goal reduced overhead costs through more efficient back-office operations? Is it greater customer loyalty and higher referrer scores? Is it lower cost for travel or facilities?

Every one of these targeted returns can very likely be supported through the application of a specific Unified Communications technology. However, all of these returns must begin with a decision by the management in some part(s) of the organization to initiate and lead changes in the daily operations. The solution, then, is to start with the returns that are specifically embraced and supported by the responsible operational management team.

Once those decisions are made, attention can shift back to the investments: What are the specific investments needed to support each specific return? Often, the amount of investment is much smaller than those proposed by vendors in the old ROI approach. For example, none of the five examples of returns listed above require a change to the desktop telephone or PBX. Actually, the relevant new UC technologies are usually presence, instant messaging, and conferencing, all of which operate on the users' computing devices--desktop or laptop PC/Mac, tablet or smartphone. These technologies are supported by professional services to integrate these communications into the business processes that will be revised in these UC-based initiatives.

The analogies can be seen everywhere in our personal lives. For one example, if we want a new entertainment center, we don't have to break the lease and move to a whole new home.

Shifting from ROI to IOR can change the game in your organization in your favor. It can help shift the focus to the outcomes rather than just the technologies. It can restructure your communications roadmap to prioritize on the actions that will have the biggest effect on the organization's results. It can put your Telecom and IT organization at the decision-makers' table and help make it a crucial contributor to your enterprise's success.

Please let me know how this approach might work for you by posting a comment. We'll respond to those posts and will be adding more insight on IOR in the coming months.