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Executive Summary

Today more than ever, government decision makers must make the most of scarce resources and at the same time respond to ever-increasing demands for improved performance and new technology. These competing demands generate close scrutiny of proposals for new information technology (IT) investments. What’s more, high profile IT system failures have raised concerns about why these investments so often fail to live up to expectations. As a result, many IT investment planning processes now require some analysis of the costs and returns expected from that proposed investment. Unfortunately, public sector managers often lack models that can guide them through such analyses. This Guide is offered to help fill that gap.

The Guide provides that help by presenting a practical approach to understanding what ROI analysis can and cannot do. A meaningful return on investment (ROI) analysis in information technology is a little like saying you want to live a healthier lifestyle. Like lifestyle changes, ROI analysis is not just a single component. Instead, it is a collection of methods, skills, tools, activities, and ideas. They can be combined and used in many different ways to assess the relative value of an investment over time. Applying this collection in a particular situation requires making many choices among the ideas and methods available and conducting an analysis appropriate to the decision at hand.

Different choices will produce different results. Therefore the Guide presents a framework of the key questions that should lead to an appropriate ROI analysis. It then presents a review of the methods and resources needed along with examples of different approaches in detailed case studies.