As the world plunges into the digital age, businesses are scrambling to get the best software solutions that could help improve their operations. However, there is no such thing as limitless spending. It would help if you were smart about which software solution to invest in.
Before you fully commit to one, you must carefully weigh the benefits it can offer to your company. The best way to determine if you will be getting your money’s worth is to calculate return on investment for software.
According to IDC, global businesses will invest around $1.7 trillion in digital transformation. No matter what type of software or business solution you plan to incorporate into your system, you must first evaluate and monitor its ROI.
To help you, here are some tips for calculating your new software’s ROI:
Determine the purpose of your software
A wide range of software solutions are available that offer different services and benefits for your company. Hence, calculating ROI for technology investments may vary depending on the niche and purpose of your chosen software. By determining these two, you will know how to measure its ROI.
The first question you must ask yourself before investing in software is: what aspects of your business do you need to improve on? This will help you determine what type of software solution would benefit your company in the long run.
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For example, you cannot expect marketing automation software to benefit your HR and finance departments. Its tools and functions will most probably be limited to improving your marketing and sales operations. Thus, you must take this into account when computing the software’s ROI.
Choose easy-to-understand metrics
There are many ways on how to calculate ROI for a project. Whereas the finance department probably has more advanced and technical metrics to measure ROI for software solutions, you could choose metrics that are more relatable and easier to understand. Doing so would help you show your software’s immediate and palpable advantages to the stakeholders and important decision-makers.
For one, financial gains would be one of the most important metrics. This would ask the questions:
- Does it help increase revenues and profits?
- Does it help cut down on operation costs?
- Does it eliminate other expenses?
Aside from financial gains, you could also consider how the software contributes to increasing the efficiency and productivity of your processes. As time is money, you can also determine its advantages if it helps reduce overtime work, contributes to your team meeting deadlines and ensures you remain compliant with industry regulations.
Take into account the learning curve
Without taking into account the human element in software implementation, you might end up losing more than you are benefitting from your recent investment. The implementation of a new software solution could bring real changes to your teams’ workflows. It could impact their productivity and efficiency—either negatively or positively. This would largely depend on how they can adjust and cope with the software.
Take this scenario, for example. You have just picked the ideal solution for your company in this FinancesOnline compilation of CRM software. You have just estimated its ROI, and it seems to have checked all your boxes. However, upon implementation, you notice that you aren’t hitting your predicted targets. Upon closer inspection, you realize that your team members are having difficulty learning and understanding the invoicing software.
The whole point of getting software is to make processes easier and faster. If it has a steep learning curve, it might backfire in the end. Before you know it, you will have minimal gains from your recent investment.
Plan for the worst-case scenarios
Computing for a software’s ROI isn’t as linear as you might think. After all, certain risk factors that could affect your business in the long run. In fact, 39% of businesses cited cyber attacks and privacy breaches as the biggest threats when implementing new software within the company
These risk factors could force you to spend more than you initially planned. Data breaches, for one, could cost you millions if you become too careless and reckless with your digital security. This could even offset all the revenues and profits that your software has accumulated over time.
When calculating your software’s ROI, you must always look at the big picture. You aren’t just listing down the benefits and advantages it could offer to your company. You must also take into account the possible expenses needed to maintain it. This would include IT support, security programs, and backups.
Involve stakeholders for benefits estimation
Estimating the benefits of a software solution can either be a hit or miss. On paper, it might work out well. But the reality could easily be far from your expectations. Hence, it is essential to involve the stakeholders who will be directly benefiting from the software itself.
Stakeholders could see the software’s benefits and impacts from specific viewpoints. Not to mention, they can base their estimations on past experiences and expertise. This way, you aren’t just shooting in the dark when computing for a software’s ROI.
Likewise, listening to many voices could help give you a holistic and well-rounded evaluation of the software. You can ask all the departments involved regarding the financial gains they think they will receive from the software. This way, you have a better estimation of its ROI. Likewise, consider going top to bottom for a lasting buy-in for your new software.
Calculate ROI for the long term
Some software might appear great at first glance, but the future could be unpredictable. It might work out great in the first few months only to drain your resources in a year or so. Without properly assessing how software could affect your company in the long run, you might end up losing more than you have initially benefited. Thus, it is better if you calculate its ROI for the long term.
There is nothing wrong with thinking far ahead. Having a clear vision of the future could help you make smarter decisions along the way and allocate your resources accordingly. It is the same with your software’s ROI. You would want to make sure that your investment will continue to benefit you a few years down the line.
By calculating the ROI for the long term, you can fully maximize the software’s benefits. This also allows you to determine whether this investment is truly worth it compared to other software.
Let the numbers speak
While investing in a staffing agency software can help with business growth, it can also put a huge dent in your recruitment systems if you take it for granted. Before you decide to commit to one, you must first determine and evaluate its ROI. This way, you won’t be wasting your time and money on software that isn’t bringing you value.