How to use ROI calculators wisely

Many vendors, storage and otherwise, offer tools to calculate the return on investment (ROI) you can get from installing their products. Since projected ROI is critical in most major storage purchases, these calculators are extremely useful in making the storage decision. However, like any other tools, they need to be used wisely and preferably with some understanding of the tool itself.

Of course, not all ROI models come from vendors or resellers. There are a number of companies that develop ROI models for end users. Among others,

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CIOview Corp. offers ROIview, and Glomark Corp. has ROI calculators that can be applied to many parts of the IT business, including storage. However vendor or reseller-provided ROI tools are much more commonly used.

The more elaborate the tool, the more precise the answer may be. However, elaborate tools require more data from the user. A really accurate ROI tool is likely to require elaborate profile information on the user's present storage system and that information can involve considerable work to collect.

In using an ROI tool it's important to understand just what is being measured and why. Some tools are designed to focus on specific parts of the storage system, such as SAN switches. Others are oriented toward kinds of uses, such as transaction processing. Still others tend to compare products only in specific categories, such as storage arrays.

Finally there is the matter of the assumptions underlying the tools. An ROI calculator is fundamentally a model and like any other model, it is no better than the assumptions that go into it. Incorrect or inappropriate assumptions can render even the most elaborate ROI tool worthless.

Here again there is a divergence in approaches. Some vendors attempt to make their tools as assumption-free as possible. This can make the results more accurate, but it means a lot more work on the part of the customer and reseller to gather the information that replaces those assumptions. Further, since some of the information is often not available, this often has the effect of transferring the making of assumptions from the model to the model user.

If the results of an ROI tool are an important part of your acquisition decision, it is worthwhile to spend some time exploring the model and the underlying assumptions to make sure they are a reasonable fit for your business. Meta Group has a research paper aimed at vendors giving suggestions for what an ROI tool should include at www.mitforumcambridge.org/spring02/resources/ROIModels.pdf. It makes a handy list of things to look for in evaluating an ROI model.

One fairly simple sanity check is to compare the results from the ROI tools of the top two or three competing vendors. If the numbers are in the same ballpark it's more likely they are correct. If a vendor's numbers come out quite differently, it's worth taking the time to explore the reasons for the difference. It may be a quirk in the model. Or it could be a major opportunity.

Finally, keep in mind that the results of an ROI calculation are not the same as a bid. There is a range of uncertaintity and a difference of, say, ten percent in results from competing vendors may not be significant.

Rick Cook has been writing about mass storage since the days when the term meant an 80K floppy disk. The computers he learned on used ferrite cores and magnetic drums. For the last twenty years he has been a freelance writer specializing in storage and other computer issues.

This was first published in October 2002

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