IT + MONEY = ROI?

Understand the Pros and Cons of Technology Investments

By GREG PELLERIN

Bill Gates and the president of General Motors were having lunch. Gates boasted of the innovations his company had made. “If GM had kept up with technology the way Microsoft has, we’d all be driving $25 cars that get 1,000 miles per gallon.”

“I suppose that’s true,” the GM exec agreed. “But would you really want your car to crash twice a day?”

I think of this story whenever we’re asked by a client to justify the return on their technology investment. The latest and greatest may be better, but is it right for you, and how will it show up on the bottom line?

Take the healthcare industry, for example. Institutions are spending hundreds of millions — and, in some cases, billions — of dollars to meet new federal electronic healthcare (EHR) guidelines. Taxpayer dollars are in part funding the transition so that doctors can talk to the emergency room, radiology can talk to oncology, nurses can talk to the pharmacy, and everybody can talk to the accounting department.

Linking all systems together will invariably help improve patient care and no doubt provide accountability when it comes to paying for it all. That should help Washington’s bottom line as well as those of the insurance industry. But what about the hospitals? Hundreds of millions of dollars in up-front expense and tens of millions of dollars in annual system maintenance costs later, will it all be worth it?

A discussion on the subject took place recently on a LinkedIn forum, and the arguments for and against, can, quite frankly, be made for any business, inside or outside the healthcare world.

The Pros

• Technology reduces fraud, waste, and abuse;

• When used correctly, inter-department communication will drastically improve, making for a more efficient organization and happy customers (patients); and

• New-data analysis can identify strengths and weaknesses, driving process improvement and lowering costs.

The Cons

• The cost of installing and integrating software that, in the case of EHR, runs $250 million. An additional $30 million a year will need to be spent to keep it all running. That can only be recouped, some say, through massive cutbacks in personnel (either that, or as one online-forum participant suggested, “reduce the average physician’s salary by $100,000 a year!” That’s not going to happen).

• The system is broken. Hospitals, like many businesses, are being asked to improve quality even though they will need to spend more to operate and be paid less to do it.

Ask the Right Questions

So how do you judge ROI when it comes to a technology investment for your business? Start by doing a thorough LEAN analysis of your organization and industry. Begin by asking yourself two simple questions:

Why am I doing this? It may be something thrust upon you by the state or federal government, an industry group, the age and/or performance of your existing infrastructure, or security concerns.

How will it make my business better? Technology is often touted as making an organization more efficient, augmenting existing or opening up new capabilities, or allowing for increased capacity.

If you’re satisfied with the answers, make sure you then have a solid understanding of your existing network, because that needs to be the benchmark for your comparison. You don’t have to join the local ‘geek squad,’ but you should be asking the bits-and-bytes experts for a reasonable overview of your current systems, processes, and personnel. If you can’t understand it, tell them to go back to the drawing board. Throw out the acronyms and have them make their pitch again. You want an understanding of all the hardware and software you’re using today. You want assurances that all processes are documented and reviewed for optimal performance. And, finally, you want to know that you have the right team in place to run what you have now and handle the changes ahead.

With all of these answers in hand, you can now weigh the capital expense of the hardware or software against the resulting increases in operating expense and determine if the spending is appropriate for your business size and complexity.

Return on investment is not a simple ‘A + B’ calculation. But if you follow the process, you just may keep your ROI from turning into an IOU

Greg Pellerin is a 15-year veteran of the telecommunications and IT industries and a co-founder of VertitechIT, one of the fastest-growing business and healthcare IT networking and consulting firms in the country; (413) 268-1605; [email protected]