Cost-Benefit Analysis: Which Benefits are Worth the Cost
Any change to a current system or process incurs a cost. Even when the costs are small, perhaps only the cost of giving up the old for the new, getting specific about costs will help catalyze decision-making.
In Bridging the Gap, we use the term Investment synonymously with Cost. Your organization will be Investing in Solutions that deliver specific Benefits. In a good investment the Benefits outweigh the cost of Investment. In a great investment the benefits produce the highest impact possible per dollar invested.
A Cost-Benefit analysis considers all costs, even the less obvious ones. Quantifiable benefits are stated in comparable terms—usually dollars—and unquantifiable benefits are clearly articulated and tied to indicators and outcomes. The result is a focused snap-shot of what an organization may expect to both pay for and gain from an investment.
Costs are typically easier to qualify than benefits. Bridging the Gap evaluates costs as External Costs, Internal Costs , and Opportunity Costs.
The most common and significant external investment is technology. Because equipment purchases, such as new computers or mobile devices, will cost more upfront but very little over subsequent years, and because software license structures vary from product to product, we recommend calculating costs as distributed over 3-5 years.
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