Measuring the ROI of an application-focused performance management tool

I recently polled our customers to find out how they justify their return on investment when it comes to purchasing business transaction management (BTM) solutions or any other application-focused performance management solution.  No two answers matched.  To put it mildly, I was surprised by how many different ways IT operations teams measure the business impact of these particular tools…and to what degree they were each held accountable for ROI.

Not so surprising, many IT folks felt it was tough to directly correlate customer acquisition, satisfaction and loyalty to any one application-focused product or network monitoring solution.  Many also dismissed the traditional business model approach of trying to equate a software management purchase to a reduction in IT staff headcount as “old-school”.

So that left me thinking…is getting the green light to invest in a new performance management solution still about proving out ROI in less than a year?  Or is it more about convincing senior management that this is the missing “piece of the pie” needed to position IT operations as a strategic asset that can optimize end-to-end business performance, resolve issues before they affect revenue-generating services, and ultimately guarantee an amazing end customer experience?  In other words, what else could your people do if you eliminated more unpredictable, productivity-sapping firefights in the future?  Or perhaps I am totally out to lunch, and it’s really as simple as the old “reactive” saying that you only sell umbrellas when it rains?

The answer would seem to vary, depending on who you are talking to and whether you are in a reactive or proactive situation, so it’s probably wise to cover all tracks.

If you are faced with a “reactive” situation, and many of us have been there, where application, network, or third party service outages and slow response times are resulting in high support costs, a loss of customers and a loss of revenues, justifying the purchase of a performance solution that can quickly detect and isolate the root cause of the issue becomes a lot easier.

It’s when you are not putting out a fire, but proactively preparing for that “what if” scenario where justifying the ROI of a performance management tool can become a bit tougher to do. Most CTO’s business objectives include elements of greater operational efficiency, reduced support costs and improved quality of service (QoS) or end customer experience.  Looking at the business impact your new performance management solution will have on increased staff productivity, reduced mean-time-to-repair (MTTR), decreased service level agreement (SLA) incidents, and a reduced number of customer-reported service outages should provide the justification you need to move forward with your purchase.

If you’re looking at all of this from the CFO’s perspective, then it becomes a question of payback and usually an ROI in less than a year. In the reactive case, this is a simple calculation – how much revenue can you recapture? How much can you reduce support costs? In the proactive case, the question you’re really trying to answer is – how does our APM investment help us grow the business without growing our staff costs and in-house development efforts in a direct linear relationship? If you can answer this question, then you’re talking about margin growth. And that’s a great way to measure payback.

Every corporation weights the importance of these areas based on their own environments, business processes, and circumstances. If you are interested in receiving a more detailed copy of our business impact models, please feel free to email me:  .  If you have other ideas, please chime in your thoughts, too!