Business | Open Source

The CEO guide to measuring financial return of Open Source integration

Do you know that more than 60% of enterprise integration projects either fail to achieve initial business requirement or demonstrate negative returns? Even though Open Source often provides reduced costs, superior security, and implementation flexibility — how exactly do you measure the benefits of escaping vendor lock-in?

Set the goals

Before looking at the differences between proprietary and Open Source solutions, you need to identify and analyze the business problems it will solve through questionnaires and interviews.

You should have a deep understanding of existing expectations, business drivers, and future strategy in order to define critical success factors. This will create a clear finish line everybody will aim for; when crossed, you will know for sure that the project has achieved its goals.

Assess legacy IT

Now let’s look at it from the other end. How do your IT applications handle the process in question today? Map your IT infrastructure and value flow, evaluate commercial and technical risks until you find the gap that causes the original problem. Describe the limitations of current IT portfolio and plan to consolidate, integrate, or remove some applications.

Establish functional scope

Anticipate future growth with additional solutions such as document management, enterprise intranet, e-commerce, corporate website, or media portals. Chances are you will be able to build the missing or even all the components based solely on Open Source software.

Select software vendors

Let’s get a bit more technical and pave the roadmap from point A to point B outlined above. Invite your CIO and CTO to design an integration framework and sketch an updated IT architecture best suited to the specified business requirements.

If you choose Open Source technology, it will help your organization to manage change and complexity. Consider system compatibility and productivity issues when evaluating potential products and vendors.

In order to figure out the total cost of ownership correctly, take into account acquisition and operating implications, such as training, support, and maintenance costs.

Learn to quantify benefits

Imagine that the integration project has been perfectly implemented and the new systems are up and running smoothly. You need to measure 3 gains: time and money saved, and profits earned due to the new level of business. If you understood the metrics of current state of the affairs well enough, there should be no problem calculating these figures in the future.

The primary area where Open Source saves money is software licence fees. While other expenses do exist, they are still significantly lower as compared to proprietary solutions, especially in the long run.

Gather all the related expenses and see the difference. Some areas of possible cost reduction:

  • Interface development
  • Operations and maintenance
  • Data entry and duplications
  • Manpower
  • Inventory
  • Logistics
  • Transaction processing
  • Reporting

Time savings are specific to the processes in your organization that are being automated. Once you know the average time it takes before and after, they can be multiplied by corresponding costs of each cycle and yield a definite monetary return estimation.

Whether you are increasing capacity or attracting new customers, the benefits of enabling new business can be predicted and measured. Watch out for external bottlenecks that also influence return forecast, but are out of your control.

Go for numbers

If you want to have a realistic implementation ROI, everything needs to be converted into numbers and eventually measured in monetary units. Then exercise becomes simple and ROI is simply net profit minus investments.

Another important number is the payback time, the date when when you plan to break even and prove that the whole initiative is profitable. Having these two KPIs in hand will show the value of Open Source integration and convert your IT department from cost center into business unit that is respected and listened to by the board.

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