Institute 2008 what will be the amount of roi if we

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Institute, 2008). What will be the amount of ROI, if we factor in the errors? Figure 2: ROI Sensitivity to Error 256
Botchkarev & Andru Figure 2 shows a diagram with two lines: Line 1 shows ROI for the case when costs were pre-dicted with zero error and the relative error for the returns changes from -10% to +10%; Line 2 shows ROI for the case when returns were predicted with zero error, and the relative error for the costs changes from -10% to +10%. For these cases, ROI (from originally estimated 20%) is float-ing in the range from 8 to 33%. The effect of the errors will be maximized, when the returns errors would be negative (-10%), and costs errors would be positive (+10%). This is illustrated in Figure 3. ROI range is getting even broader from -2% to around 50% and more difficult to be called “highly accurate.” Note that at some “worst case” point, ROI becomes “negative” (from an initial “true” ROI of 20%). Observations from this exercise: ROI is not immune from errors. Unavoidable uncertainties/errors of estimating costs and returns propagate through the ROI formula and affect the result. “Precise” ROI is more an exception than the rule. Results of the ROI calculations with decimal places are most likely questionable. For prudent analysis, an ROI number should be accompanied with characteristics of the accuracies of costs and returns estimates and evaluation of the accuracy of the final ROI number. The value of this exercise is in the demonstration of the approach and illustration of the level of the ROI accuracy for a typical CRM project. Although performed on a specific example and not claiming any generic value, it has shown that even relatively low-level errors of estimating costs and returns (+/- 10%) may lead to significant ROI inaccuracies. To make a ROI number meaning-ful, it should be provided with an assessment of its accuracy. Figure 3: ROI Sensitivity to Error (worst case scenario) ROI Virtualizations The main differentiator of ROI Virtualizations is the inclusion of intangible returns/benefits in ROI calculations. These are shown as $B in the formula. See Table 1 for the characteristics of this ROI type. 257
A Return on Investment as a Metric for Evaluating Information Systems Intangible Benefits – Examples Intangibles are benefits that are difficult to measure and assign a monetary value. For example, Hao, Jager, Cheng, and Hulten (2011) suggest that intangible assets can be broken down into three groups: computerized information, innovative property, and economic competencies. Some examples of intangibles include the following (Kasabian, 2009; Mogollon & Raisinghani, 2003; National Association of Chronic Disease Directors, 2009). Better information – Information systems are intended to provide relevant information for decision-making, contributing to better decisions, and therefore enhancing the return on investment.

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