What You Get out of Web Service
A Web Hosting Article Contributed by Frances Rhea
Defining Return on Investment (Roi) for Web Service
Return on investment (ROI) is the determination of the value of investments and expenditures for a web service. This return can be determined by an analysis of the web service.
Roi Analysis for Web Service
There are two methods to conduct an analysis of web service. These are discounted cash flow and payback period analysis.
-- Direct and Indirect Measures
Both the direct (cash flow-generating contributions of the new technology or project) as well as the indirect measures should be considered in this calculation.
-- Discount Rate
The discount rate is the opportunity cost of capital. This is the expected rate of return that could be obtained from other projects of similar risk.
-- Net Present Value (NPV)
The difference between the cost of an investment and the return on an investment is the net present value. A NPV calculation accounts for the cash time value by discounting the future cash flow for the investment at a rate that varies with their risk of investment. This calculation determines the present value of their return and compares it to their initial investment.
The return on investment for technology projects, both new and existing, has to account for multi-dimensional functions related to the operational costs, changes in business activities, growth, efficiency, and productivity.
A ROI analysis is becoming a requirement for any new project or use of new technology. It will also help measure the success or failure of any existing project. A good ROI analysis can lead to lower costs, improved business performance, and a competitive advantage.
Roi and Web Service
A company needs to calculate the implementation and ongoing costs that are associated with any web service including software, hardware, system integration, and future support expenses. These estimates can help determine the ROI for their proposed web service solution.
When the ROI is being calculated, there are business and personnel factors that have an impact on it. Technology alone will not produce the results and benefits projected in any calculation. Several factors, such as the speed of implementation and adoption rates, play a critical role in determining your final return.
Calculating Roi of Web Service
Your return on web service comes from increased operational efficiency and reduced costs from streamlined and automated business processes, reduced development time, and reusability.
The factors to look at are costs and expenses, technical benefits, and business benefits. The costs and expenses are hardware, software, training, and bandwidth requirements, monitoring tools, operational costs, and vendor consulting. The technical benefits are software development automation, streamlining of middleware technology, usage of integration, integration with applications and business process management, duplication of software code which leads to reusability.
The business benefits are end-user productivity, participation in dynamic business, collaborative business activities, better and cheaper customer service.
There may be other direct and/or indirect benefits for the using a web service. This could include a faster time to market, increased process efficiency, and increased efficiency through automation. These should also be accounted for in your ROI calculation.
