DIY e-biz ROI flatters to deceive

Just how well is that e-business project going? What exactly is the return on the investment (ROI)? If you are, in common with 80 per cent of so big companies, calculating the ROI in-house, you could be deluding yourself.

Companies assess their e-business ROI through rose-tinted glasses, consistently reporting better results than those who subject themselves to third-party assessment, Jupiter Media Metrix says.

The Web analyst firm bases its conclusion on its survey of 471 senior executives of firms with an annual turnover of more than $50 million.

Almost 60 per cent of inhouse ROI assessments generated a positive result, according to Jupiter, which suspects that in many cases this is merely a "self fulfilling prophecy".

Worse, DIYers use "nconsistent definitions of ROI metrics in an effort to show positive results, therefore making it nearly impossible to correctly choose which projects should be funded and which should be killed".

So what is to be done? Jupiter urges business managert to @precisely and consistently define financial metrics such as ROI, rather than attempting to 'guesstimate' a dollar value when there is no justification for doing so".

Also, companies must "separate hard dollar ROI calculations from soft dollar 'relationship metrics' such as Return on Relationship, which is a metric specifically designed to capture the impact of the Web on customer relationships".

This sounds very fuzzy to us: how do you work out a Return on Relationship? Jupiter has the answer - nearly. It is currently developing a Relationship model and will be publishing a report on the subject in a few months.

Jupiter may have its work cut out on converting the masses - right now, just 17 per cent of big businesses use external consultants to assess their e-business ROI. Many companies don't bother to measure their e-business ROI at all. ®