1. Simple Return on Investment Calculations Elton Billings elton@cluebox.com Elton Billings elton@cluebox.com

2. Focus of This Discussion:  Tactical ROI  ROI for a single initiative or application  Identification of sources of Return  Examination of task cost savings on a per- transaction basis  Tactical ROI  ROI for a single initiative or application  Identification of sources of Return  Examination of task cost savings on a per- transaction basis

3. Some ROI Comparison Methods:  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100  Return after deducting Investment for a fixed period: (Return - Investment)  How long until Return equals Investment: (Investment / Return per week)  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100  Return after deducting Investment for a fixed period: (Return - Investment)  How long until Return equals Investment: (Investment / Return per week)

4. Identifying Costs (Investment)  One time costs Development costs Cost of any new software Cost of any new hardware Training costs  Ongoing costs Information update costs Maintenance costs Training costs Costs to increase capacity when needed  One time costs Development costs Cost of any new software Cost of any new hardware Training costs  Ongoing costs Information update costs Maintenance costs Training costs Costs to increase capacity when needed

5. Identifying Sources of Return  Savings through shorter task time  Savings through shorter processing time  Savings through the prevention of “leakage”  Savings through shorter task time  Savings through shorter processing time  Savings through the prevention of “leakage”

6. A Method for Identifying Savings:  Observe old process  Observe new process  Make sure to include all phases of both methods  Measure process times for both  Check for any statistical differences in outcome  Measure frequency of task  Understand fully loaded employee cost per hour  Observe old process  Observe new process  Make sure to include all phases of both methods  Measure process times for both  Check for any statistical differences in outcome  Measure frequency of task  Understand fully loaded employee cost per hour

7. Old Conference Room Application:

8. Web Conference Room Application:

9. Costs and Savings  Costs: 3 days to develop interface 24 hrs x $40 = $960  Savings: Each reservation took 10 minutes less 4560 non-recurring reservations first year 760 hrs x $40 = $30,400  Costs: 3 days to develop interface 24 hrs x $40 = $960  Savings: Each reservation took 10 minutes less 4560 non-recurring reservations first year 760 hrs x $40 = $30,400

10. ROI Calculations:  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($30,400 / $960) x 100 = 3167%  Return after deducting Investment for a fixed period: Return - Investment $30,400 - $960 = $29,440  How long until Return equals Investment: Investment / Return per week $960 / $585 = 1.6 weeks  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($30,400 / $960) x 100 = 3167%  Return after deducting Investment for a fixed period: Return - Investment $30,400 - $960 = $29,440  How long until Return equals Investment: Investment / Return per week $960 / $585 = 1.6 weeks

11. Business Card Request:

12. Identifying Sources of Return  Online form and paper form took about the same time to complete  ??????????  The rest of the story… Paper form left in manager’s inbox for approval When we tried to follow up, it was gone Filled out form again Purchasing department completed and sent printing request to vendor  Online form and paper form took about the same time to complete  ??????????  The rest of the story… Paper form left in manager’s inbox for approval When we tried to follow up, it was gone Filled out form again Purchasing department completed and sent printing request to vendor

13. Costs and Savings  Costs: 5 days to develop application and web interface 40 hrs x $40 = $1600  Savings: Each order took 10 minutes less time for routing and processing One third of orders involved about 6 minutes for searching, questions, and re-submission of forms 743 Orders first year of application 148 hrs x $40 = $5920  Costs: 5 days to develop application and web interface 40 hrs x $40 = $1600  Savings: Each order took 10 minutes less time for routing and processing One third of orders involved about 6 minutes for searching, questions, and re-submission of forms 743 Orders first year of application 148 hrs x $40 = $5920

14. ROI Calculations:  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($5920 / $1600) x 100 = 370%  Return after deducting Investment for a fixed period: Return - Investment $5920 - $1600 = $4320  How long until Return equals Investment: Investment / Return per week $1600 / $114 = 14 weeks  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($5920 / $1600) x 100 = 370%  Return after deducting Investment for a fixed period: Return - Investment $5920 - $1600 = $4320  How long until Return equals Investment: Investment / Return per week $1600 / $114 = 14 weeks

15. New Business Card Request:

16. Vacation Request:

17. Identifying Sources of Return  Old process was to send e-mail to department admin, who forwarded to payroll after approval  Online approval process cut delays due to missing information, loss of e-mail  The rest of the story… Discovered verbal approvals sometimes skipped process E-mails not always forwarded No reliable record of requests existed “Leakage” may have been as great as one day per person per year  Old process was to send e-mail to department admin, who forwarded to payroll after approval  Online approval process cut delays due to missing information, loss of e-mail  The rest of the story… Discovered verbal approvals sometimes skipped process E-mails not always forwarded No reliable record of requests existed “Leakage” may have been as great as one day per person per year

18. Costs and Savings  Costs: 5 days to develop application and web interface 40 hrs x $40 = $1600  Savings: Each request took 10 minutes less time for routing and processing 3218 requests in first year 536 hrs x $40 = $21,440 Estimated 5% of employees correctly reported one additional day of vacation each 5% x 800 employees = 40 days 320 hrs x $40 = $12,800 Total savings = $34,240  Costs: 5 days to develop application and web interface 40 hrs x $40 = $1600  Savings: Each request took 10 minutes less time for routing and processing 3218 requests in first year 536 hrs x $40 = $21,440 Estimated 5% of employees correctly reported one additional day of vacation each 5% x 800 employees = 40 days 320 hrs x $40 = $12,800 Total savings = $34,240

19. ROI Calculations:  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($34,240 / $1600) x 100 = 2140%  Return after deducting Investment for a fixed period: Return - Investment $34,240 - $1600 = $32,640  How long until Return equals Investment: Investment / Return per week $1600 / $658 = 2.4 weeks  Return as a percentage of Investment over a fixed period: (Return / Investment) x 100 ($34,240 / $1600) x 100 = 2140%  Return after deducting Investment for a fixed period: Return - Investment $34,240 - $1600 = $32,640  How long until Return equals Investment: Investment / Return per week $1600 / $658 = 2.4 weeks