Taking Measurements

You've got to make that first ROI calculation to get started, and there are ways to make the process easier. Since you're looking at just the first stage of a project or at a small-scale pilot, you don't need to make an ironclad case. What you do need is "to tell a good story," says Hanley. That story—a description of what life will be like after the project is launched, backed up with real-world anecdotes and statistics—is often enough to get management to sign off on the project, at least for the first three to six months.

There are also plenty of resources to help you create the initial proposal. The CRM folks looking to build your spanking-new project are—not surprisingly—increasingly willing to pitch in. Within the last year, many major e-commerce and CRM companies, such as BroadVision, Selectica, and Siebel Systems, have launched their own ROI programs, developing financial models to show prospective customers how their investments can pay off.

Providers have databases full of before-and-after statistics from customers. Siebel has over 1,700 metrics culled from over 3,500 customers. Such metrics include average order size, sales per representative, sales per customer, call-center costs, order-entry errors, and returns. Naturally, you're bound to be suspicious of someone who tells you that you'll make money using the very products they're selling, but when used wisely, these metrics can be helpful in building your business case.

"Sure, vendors are self-serving," says Jonathan Copulsky, a partner with Deloitte Consulting. "But they're not necessarily wrong. We always encourage our clients to get peer references, finding out where it worked somewhere else."

Software, too, can help you build your case. CIOview Corp. offers 25 products under its ROInow! line, each targeted to a different technology, such as collaborative computing and data warehousing; each one costs $495. Like the vendor models, each ROInow! package leverages the metrics of companies that have already gone through a deployment.

Even with such metrics, you're still not getting a definitive calculation. CIOview's president, Scott McCready, calls the results a "quick sketch of approximate costs and benefits." But you do get an idea of the factors you need to look at when thinking about ROI. These tools are particularly useful for small companies that can't afford consultants.

Shop At Home knew its supplier portal paid off when it looked at its cancellation rate three months after launch and found a decrease of just over 6 percent. But analyzing the numbers—understanding why 20 percent of your customers abandon their shopping carts—requires a solid understanding of your business practices. Although calculating ROI may be trickier than it used to be, the key ingredient remains the same: knowing your business inside and out.