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“Crossroads goes beyond delivering technology
services. We trust them with critical company information and they play
an integral part in the planning and implementation of our company’s
future. We see Crossroads as a business partner in the truest sense.”
Dennis Tauchen
Owner and COO
Direct Enterprises, Inc.
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Microsoft's Rapid Economic Justification (REF): A New Model for
Technology Projects
Microsoft's Rapid Economic Justification: REF, New Project Management
Operating System, Total Cost of Ownership (TCO), Return on Investment (ROI),
IT Professionals
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With the imminent release of a new operating system, Rapid Economic
Justification (REF) from Microsoft, IT professionals must begin building their business case for (or against) its deployment.
Most companies view their open and proposed technology projects as a portfolio, the contents of which are evaluated based on one or more of three models, Total Cost of Ownership (TCO), Return on Investment (ROI), and the Rapid Economic Justification (REF) model developed by Microsoft.
- TCO is a comparison of the direct and indirect costs associated with the before and after state of a proposed solution.
- TCO is generally expressed along with a payback period
- TCO has the advantage of being a straightforward evaluation that can
be completed without significant involvement from other departments
- Unfortunately, TCO is a purely financial model that cannot easily
incorporate data on benefits like increased productivity
- ROI includes cash flow and return on capital issues compared to dollars spent..
It is a more complex analysis than TCO; return in computed using relatively sophisticated metrics such as
- Internal Rate of Return (IRR), and
- Net Present Value (NPV).
ROI computes an interest rate that equates the net present value of future cash flow to zero. This rate, often called the hurdle rate, can be compared to the cost of capital to determine the cost benefit of a proposed project.
The drawbacks of ROI include:
- The difficulty in agreeing on metrics
- It's inability to incorporate risk analysis
- REJ combines the strengths of both TCO and ROI, and adds risk analysis metrics. The REJ model is a proprietary model from Microsoft, and is closely related to the Microsoft Solutions Framework.
However, since REJ is a proprietary analysis, it may yield biased results. Moreover, decision makers may regard with some skepticism a proprietary model that recommends a substantial investment in its own technology.
Each of these models has its applicability. For example:
- A decision driven solely by cost may benefit from the simplicity of a TCO analysis.
- Larger projects may require the broader analysis, justifying the cost of ROI or REJ.
For more information about Rapid Economic Justification, please visit the
Microsoft web site.
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For information about how our integrated network design program can establish or improve your business's
computer network system, call 1-317-529-0418, or
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Cities We Serve in Indiana
We provide services in all markets in Indiana, from rural farm communities to the larger metropolitan regions of:
- Anderson
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Point
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Chicago
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Wayne
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Porte
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Albany
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Bend
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Haute
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Lafayette
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Technical Support |
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317-770-6400 |
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"Crossroads Business Solutions is not a one man
shop, their team is quick to respond and resolve our issues."
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