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Monday, March 8, 2010

It is the question of Project Management of MB0033 assignment of SMU MBA. The question is – “What is the significance of reviewing ROI? Explain in detail.” We already have discussed on many assignments in this category such as - Deming’s philosophy relevant to Project Management, How can risks be prioritized in a Project Management and Introduction to ScMo Supply Chain Monitoring. Now, I am going to present my theory on ROI (Return on Investment) for MB0033 MBA assignment of SMU.

Return on Investment (ROI) is the calculated benefit that an organization is projected to receive in return for investing money (resources) in a project within the context of the review process. The investment would be in an information system development or enhancement project. ROI information is used to assess the status of the business viability of the project at key check points throughout the project’s life-cycle.

ROI may include the benefits associated with improved mission performance, reduced cast, increased quality, speed, or flexibility, and increased customer and employee satisfaction. ROI should reflect such risk factors as the project’s technical complexity. The agency’s management capacity, the likelihood of cost overruns, and the consequences of under – or non-performance where appropriate, ROI should be reflect actual returns observed through pilot projects and prototypes.

ROI should be quantified in terms of dollors and should include a calculation of the break-even point (BEP) which is the date when the investment begins to generate a positive return. ROI should be re-calculated at every major checkpoint of a project to see if the BEP is still on schedule, based on project spending and accomplishments to date. If the project is behind schedule or over budget, the BEP may move out in time; if the project is ahead of or under budget the BEP may occur earlier. In either case, the information is important for decision-making based on the value of the investment throughout the project life-cycle.

Any project that has developed a business case is expected to fresh the ROI at each key project decision point (i.e. stage exist) or at least yearly.


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