Two kinds of payback

Let’s consider two key points in the buying decision that storage purchasers have to make.

Any purchase will require answers to the following:

How long will it take before the investment pays for itself?

How long does it take to get the system up, running, and doing what it was purchased to do?

The first point, payback analysis, is clearly an ROI accounting function. It lets the buyer focus on when he gets back his investment dollars. A simple example: the sales rep shows the purchasing agent that his company will save $1 a day by purchasing the rep’s product. Thus, if the product costs $10, the payback comes in 10 days. After that, the client continues to save money.

This is of course a trivial illustration of what is actually a complex calculation, and it is one that requires a good understanding of the business process being supported. The concept has been around for decades, and most vendors understand the value of such a business-oriented approach when they enter a prospect’s site. Assuming both sides of the agreement understand the calculation, and can agree on the numbers involved, it can be a pretty straightforward exercise. 

The second point – how long does it take to get the system to do what it is supposed to do – is equally obvious and perhaps equally subtle. Think of this as a calculation of Mean Time to Promised Functionality (MTPF).

The MTPF number lets the prospect know when to expect the system to be fully functioning, which also has clear implications for the ROI number. Another way to look at it:

It tells the guy whose job is on the line when he can show his boss that the monies spent are actually producing tangible results.

It is a different sort of calculation than ROI, and speaks to an entirely different set of concerns – different, but probably just as important.

For years companies have been trying to put this sort of data into their sales presentations, but without empirical data backing up the claim the marketplace has pretty much been discounted all this as marketing fluff. And justifiably so.