Return on Technology Investment
ROTI is the acronym for Return on Technology Investment.
A financial metric used to assess the efficiency and profitability of investments made in technology-related projects or initiatives. ROTI helps organizations evaluate the financial benefits derived from their technology investments.
ROTI is typically calculated by comparing the net financial gain generated by the technology investment to the cost of the investment. The formula for calculating ROTI is as follows:
To calculate ROTI, you need to determine the following components:
- Net Financial Gain: This represents the total financial benefit or return the technology investment generates. It includes increased revenue, cost savings, productivity gains, and other quantifiable financial benefits directly attributable to the investment.
- Cost of Investment: This includes all the costs associated with the technology investment, such as hardware and software expenses, implementation costs, training costs, maintenance and support costs, and any other expenses directly related to the investment.
Once you have the values for net financial gain and cost of investment, you can plug them into the ROTI formula and multiply the result by 100 to express it as a percentage.
For example, let’s say a company invests $100,000 in implementing a new software system, and as a result, it achieves annual cost savings and increased revenue totaling $150,000. The ROTI calculation would be as follows:
ROTI = ($150,000 / $100,000) * 100 = 150%
In this example, the company would have achieved a 150% return on its technology investment, indicating a positive financial outcome.
It’s important to note that ROTI is just one metric used to evaluate the financial performance of technology investments. Other metrics, such as Return on Investment (ROI), Payback Period, and Net Present Value (NPV), can provide additional insights into the overall profitability and value of the investment.
- Abbreviation: ROTI