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SmartAdvice: Measuring The ROI On IT Security

It's hard to quantify how much return your company gets on security when it's intangibles such as reputation and trust that are at stake, The Advisory Council says. Also, consider security issues related to implementing a single sign-on system, and what roles should be covered in a detailed disaster-recovery plan.

Editor's Note: Welcome to SmartAdvice, a new weekly column by The Advisory Council, a Westport, Conn.-based business-technology advisory service. Each week the column will spotlight TAC's advice on two or three issues of core interest to you, ranging from career advice to enterprise strategies to how to deal with vendors. We encourage you to write to TAC and request answers to pressing business-technology issues. They will not solicit you unless asked, and will respond to you here or directly via E-mail at

Topic A: How can we measure the return on our investment in IT information security?

Our advice: Begin by heeding these words: "If you spend more on coffee than on IT security, you will be hacked. What's more, you deserve to be hacked." -- Former White House cybersecurity adviser, Richard Clarke

According to a recent Morgan Stanley IT spending survey, security is now the top IT spending priority, moving ahead of enterprise resource planning, enterprise application integration, increasing network capacity, and even the much-hyped CRM software. However, in these economic times, executive management won't even entertain an offer for a large IT security project unless the return on investment looks absolutely solid.

And the problem is that this ROI is sometimes difficult to calculate, since the benefits of IT security are frequently unquantifiable. For example: how do you calculate the benefits to your company of not having had a media-publicized security breach?

For this reason, pinning down the sometimes intangible, yet very real, costs and benefits of a large IT security project represents a challenge, especially in calculating an ROI that management can use for purposes of decision-making and comparison.

One approach is to organize the project's benefits and costs into two columns, assigning values to each. You could begin by numerically weighting each benefit and each cost, ranking them between 0 (for those bringing the least value to the enterprise) and 100 (for those bringing the most).

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Some of the specific benefits to itemize might include expected savings, realized monetary return, increased productivity, reduction of risk ( i.e., of not incurring the cost to the enterprise if security were breached; if a virus were to get inside the firewall and infect, say, 10% or 20% of users, etc. ...), company credibility (no publicized security breaches), savings in personnel (the ability to either reduce or redeploy employees as a result of the security project), and savings in annual costs (from an estimated number of intrusions prevented), and so on.

Then, in your costs column, along with your software and implementation expenses be sure to also include soft elements such as internal change management, reengineering of processes, training, loss of productivity (during the implementation and initial go-live period), maintenance (of old systems), the use of additional bandwidth and hardware, etc. Other costs to consider are disaster recovery and the maintenance of mirror sites (for mission-critical applications), to name just two.

Vendors can help in estimating the ROI, but these estimates are, predictably, on the optimistic side. It is your responsibility to perform your own due diligence by digging into the vendor estimates and assuming "worst case" scenarios. If, in the end, the "worst case" cost still makes sense economically, it's likely a good project to finance.

Lastly, an organization can tap ROI analysis services from the top accounting firms or a spate of smaller firms. Remember, however, these will all be projections and estimates. Your company won't know the real ROI until you review the project's success after six months, and then again after a year.

-- Carlos Bravo

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