Strategic Foresight - Insights in Business and Technology

   Source: Gartner

Real Options Valuation (ROV): A complex technique than TCO, ROI and EVA. It is based on the financial estimation techniques used in stock options theory. ROV is used to modify the ROI calculation by considering the value that the current project could contribute to future projects. This approach typically enhances the ROI of projects such as IT infrastructure. The cost of implementing a whole new infrastructure for just one project for one business unit’s needs is so burdensome that no one business unit could ever justify starting the new infrastructure. However, the overall value of the new infrastructure to all the business units in the organization could be huge. ROV provides a technique for justifying that first project based on the future derived value. Return on Assets (ROA): A popular measure for the performance of companies, ROA can also be applied specifically to IT assets.ROA for IT assets can be calculated by isolating the IT-specific assets from the organisational ass

Total Cost of Ownership (TCO): It seeks to capture the full cost of an IT asset from initial purchase through implementation and operation to maintenance and “end of life” costs. This is a cost-based approach that does not equate to value. It is useful for measuring IT value because it allows comparison of alternative implementations that will meet the same business need and, presumably, have very similar values to the business. If the TCO of one alternative is significantly less than the others, it represents better value for money. It includes consideration like training costs, security costs, scalability costs, and the costs of reliability deficiencies. TCO incorporates perspectives that are not purely financial. Limitation: It involves predicting future costs. This limitation can be minimised over time by tracking actual costs but, by then, the investment decision has been made. Return on Investment (ROI): It means calculating the revenue that the business generates or the c