New ROI for a New Economy

This isn't your father's ROI anymore. Nor is it the ROI of last month, for that matter. Your company can no longer expect to measure its return on Web investments by traditional click-and-mortar standards.


[From iSource Business, June 2001] At first glance, it would seem Ryder's decision is a no-brainer. Several months ago, executives at the global transportation and logistics company were contemplating two e-business initiatives. One was a project that would help Ryder improve the strength of its brand, especially as it continued to offer more and more e-business services. Another was a Web billing project.


Admittedly, both projects had merit, says John Wormwood, group director of Commerce Solutions for Ryder, but the Web billing project in particular offered a very clear value-add to Ryder's bottom line. "We had specific requests from customers for this service," she says. In essence, customers outsourced their transport management operations to Ryder, which would establish and manage carrier contracts, audit the bills, and send the client one, consolidated invoice. "What we had been doing was sending the details electronically but faxing their invoice. The customers wanted to see the summary online and be able to drill down to see costs of specific functions."


The rebranding initiative, Wormwood says, was important as well. "We were a consumer truck rental company at one time, and there are still some companies out there that don't realize we are a global logistics provider now. Spending money on a rebranding initiative would make sense because Ryder is completely redeveloping its digital brand," she says.


After carefully weighing the potential benefits of each project, Ryder decided to go ahead with both, despite the Web billing project's clear payback and despite Ryder's hyper consciousness about unwarranted costs these days.


It was not a decision made lightly. "Justifying Web related investment is hard," Wormwood says. There is not a long history of empirical benefits you can point to and, oftentimes, the value is around enhancing competitiveness, rather than decreasing costs." Unfortunately, she adds, "we found that traditional ROI [return on investment] analysis really wasn't sufficient."


To aid in the decision making process, Ryder developed a new set of metrics that would be used in tandem with the traditional ROI measurements. Called ROWI (return on web investment), these measurements "complement traditional ROI by allowing us to evaluate qualitative factors as well as quantitative ones."


These are not the last e-business projects Ryder will want to implement, Wormwood says. "But business resources are scarce," she says bluntly. "We have to have some kind of framework to ensure we are making the right investment."


Open Wallets?


Business resources are scarce these days and will probably become even more so over the next few months. "Its obvious the economy is slowing and that is affecting the way companies do business," says Jon Ekoniak, senior research analyst with U.S. Bancorp Piper Jaffray. "Companies are reprioritizing spending patterns in order to adjust. That includes IT [information technology]investments."


For supply chain managers, that means hard choices lie ahead. Global competitiveness dictates that companies can't skimp on IT investments, especially as new applications that promise to automate some new link in the supply chain are developed seemingly every few months. And, while there are clear, strategic advantages to these applications, many of them only offer a hazy promise of greater productivity.


Yet, as shareholders and Wall Street and their own Board of Directors begin to view every expenditure with an increasingly critical eye, supply chain managers find they have to make the case that financial benefits will be realized as well -- and soon. In a recent Forrester Research survey, 40 percent of respondents complained that a lack of objective data and worse, e-business hype, forces them to make investment decisions based on soft information.


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