ROI: The 800 lbs Gorilla in the Corner pt 1

Image from WikipediaA lot of the stuff I do is difficult to present in terms of ROI: web development and programming, software training, SEO/SEM, and Community Building can be very esoteric in terms of raw dollars.

Old Days
It's been like this since my first days in the computer field.
My second job in IT was as a commission sales person for NEC. To the world back then, IBM meant Computers. NEC was unknown outside Japan. They entered the US market through Europe with a superb microcomputer system based on the new 286 processor. (I did warn you I'd been at this a long time, right?)
Not only was the system faster, but it had the best color monitor on the market. It could be networked - with a little careful programming- with the new Netware software, so it didn't need a license for token ring technology from IBM.

I didn't know much about programming or computers in those days. All I knew was I wanted to work with this cutting edge stuff. Fortunately, microcomputers leveled the playing field for folks like me. Colleges were training people on mainframes. Even people with Masters' degrees in Computer Science had rarely seen a micro.
My only real advantage was to be organized. I might not have had much more to say than what was in the brochure, but I made sure I got to every appointment on time to say it.
I was really excited to be working for one of the obvious industry leaders as it expanded into a vast new market.

This one manager was impressed with my naive enthusiasm. On the second visit to his distribution company, he smiled and told me: "If you can find me one piece of software that will run on that system, I'll replace every computer in the room." I looked across the room at 25 computers, and my pupils must have dilated.
Then he said, "I'll replace them all,...if you can find me one piece of software that will run on 286 systems." Then he handed me a copy of DataSources. DataSources was once the Bible of the computing industry. These two huge books were 4 inches thick and the size of a coffee table book. One was for software. One for hardware.
"Go ahead. You can take them with you. You find one piece of software, even if I can't use it, and I'll sign the requisition today," he said. "Then come talk to me next week."

I took those books home and poured over them. I even looked through the hardware book hoping to find something to trace down in the public library. There was nothing.
I had to go back in there the next week and admit defeat. He just laughed as he handed me some coffee.

The new DataSources came out in about 6 months. It was filled with software that ran on 286 systems, and software that was compatible for both 286 and 8080 systems. Both had options to use CP/M, PCDOS or MSDOS as the operating system.
Turns out, he did replace all his computers, networked them, and signed on to an annual service contract to contain his costs - all through me. I ended up doing a lot of the work myself. I followed the NEC tech around and helped him to learn about all the new technologies.
The owner and I had a lot of coffees together.

This was the days before the Internet and Windows. Windows was out, but version 2.x didn't work reliably. It was a year or so later when version 3.1 came out that Windows began to make a place for itself.
The Internet was a secret subject for tech people. We wished upon the stars for it. It was more an impossible dream than reality. And many people thought it would never happen. The Internet would mean too much information and freedom, the hacks canted. No government would allow that.

Faith?
Thing is, this guy didn't replace his computers because he could show a real return from the dollars spent. He didn't buy them because he needed the fabulous 10Mbyte harddrives, or the advanced CGA graphics.
There wasn't any way to calculate an ROI on so many unproven technologies. The technologies were so new no one knew how much it would cost to keep them running. Netware was promising to make micros work like mainframes. It sounded almost impossible.
It wasn't hard for IBM to show that converting paper records to searchable databases saved money and increased productivity. But that was for big business with hundreds of thousands of records. IBM had whole systems: printers, terminals, harddrives, and mainframes.
No one even knew how to connect printers to these new microcomputer networks. In most cases, a programmer had to write a driver for a Netware network. How do you figure that cost into the ROI?

IBM threatened, then released their own Personal Computers. But they didn't even connect to the mainframes. PC's worked like dumb terminals which cost much less. IBM only got into the microcomputer market to quash the upstarts.
We know now it didn't work. But when this guy bought that room full of micros and networked them, he could not have justified it to anyone.

So ... Why did he buy 25 computers, a network, and a long term service contract on unproven technology and put his whole career and business on the line?

• Part of it was the excitement of the microcomputer revolution.
• Part of it was a need to keep technologically ahead of his competitors.
• Part of it was to keep up his company's reputation.
• Part of it was NEC's international reputation.
• Part of it was all the times I came to him over coffee so many times to tell him exciting and good news about the developing industry.

He made the right decision. But he only saw the ROI in passing. I doubt he ever sat down to figure it all up. If I had had to justify the purchase in terms of his return on investment, he would never have made the purchase.
Many times, I've sat down with prospective customers and told this story.
I emphasize the brilliance of his foresight by quoting Napoleon "L'audace. L'audace. Toujours, l'audace." Then I mention the practicality of the long term service contract which guaranteed him support any time, and specified hourly programming fees - and how that limited his exposure to the uncertainties.

Options
Could he have made safer, more productive choices? Maybe. No one knew it at the time, but his network absorbed technology and upgrades for almost a decade. Netware upgraded to accommodate 386 systems and software, then 486 systems.
If he had networked 8080 or Z80 systems with Netware, it would have been much more risky.
Software is defined for workers in terms of the interface. The costs of retraining staff would have been much more dramatic to move from green text on black screens to 16 and then 256 color monitors.

Color screens turned out to cause less eyestrain, headaches and were proven to be more productive. People were more willing to put in long hours and could concentrate easier on choices distinguished by different colors.

NEC did not offer a long term contract for support on such an ad hoc (technologically) network. Programming and technical support would've had to be billed at the market rate. Netware was made to run on the 286 (or at least the 8086/80186).
Replacing 286-based systems turned out to be much less expensive because IBM opened up its architecture (in a last ditch attempt to bury micros, many thought).
But no one could have known all of that.

What does this story prove?
As the story unfolds, many advantages showed themselves:

• color screens for productivity (and employee moral);
• harddrives saved server time;
• projects and departments were separated for security and practicality;
• improving technology melded software and hardware to reduce upgrade costs;
• Microsoft broke free from IBM and Windows came into its own;
  
• and much more.

Today we have the advantage of those years of anticipation and determination. But still, many purchases come down to prioritizing the goals of the business. That's really how this forward-thinking manager made his decision.
Look back at the list of reasons I gave. Then glance over the whole article. Not many of those elements could be expressed in hard numbers going in. They had to be managed to prove themselves.
And there is an element of just plain luck.

He chose to make the purchase because of his own priorities. His priorities were not easily quantifiable. There is no question they are qualifiable though. And in time some of his qualifiable reasons proved themselves.

The story illustrates a reality of any technology purchase: hardware, software, training, websites, SEO/SEM, and community building, the decision is made on priorities, not necessarily hard numbers. Technology in business is too closely integrated with ergonomics to quantify everything. Employees and customers are a part of the equation.
If the technology is not a priority, it will not be purchased no matter what is quantified.

Does that mean not to put into numbers anything that can be quantified? No. At every opportunity, quantify. Managers need numbers to manage. It's an old adage of management.
But management at every level has to respect the elements of technology that are qualifiable, but resist being quantified.
We'll explore these topics further in the next few posts in terms of each of the services and products.



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