The effective acquisition and use of technology largely determines modern business. Businesses with superior technology and superior ways to leverage that technology have massive competitive advantages over their counterparts. In line with this, there has been an ongoing arms race to try and develop and integrate the best possible software products on behalf of organizations. The leaders in your startup are probably eager to use and experiment with as many pieces of software as are relevant to your organization. This is a good idea in principle, but in execution, it can sometimes be burdensome. When calculating ROI, not all software is equally valuable to your organization, and not all software is worth paying for.
Estimating the return on investment (or ROI) is often effective in helping you better understand the role of software in your organization. The higher your ROI for a piece of software, the more value it adds to your organization compared to how much you’re paying for it.
It’s a useful metric, to be sure. But is there any way to increase the ROI of the software that you’re currently using?
Software ROI: The Basics
Calculating ROI for your software can be valuable in a number of ways. It can help you ballpark whether the price of a given piece of software is worth it. It can help you compare different types of software products to each other. Additionally, It can even help you streamline efficiency and productivity in your organization by allowing you to identify underperforming technologies or underutilized ones.
The basic concept for calculating ROI is easy to understand. All you need to do is compare the costs to the potential benefits. This can get complicated in practice, as the costs and benefits aren’t always objective or clear.
The costs are arguably easier to calculate since you’ll start by simply tallying up how much you pay for ongoing use of the software. However, you’ll also need to factor in time and monetary expenses associated with maintaining the software and training people on it.
In terms of benefits, there are many things to factor in, such as:
Time saved
Does this software spare you from manual effort or reduce the time it takes to accomplish certain tasks?
Money saved
Does this piece of software eliminate another cost of doing business, such as eliminating your need for a new vendor?
New revenue/opportunities
Does this software provide your business with new revenue or other business opportunities? For example, does it help you reach a new demographic, or can it be useful in developing a new product or service?
Value for customers
Is this software capable of adding more value for customers, such as giving them more support options? Measurable benefits to employee retention can be massive for your startup.
Competitive advantages
Are there any other competitive advantages you might have using this software? Or are you compelled to use this software to keep pace with your biggest industry rivals?
Increasing Calculating ROI of your Software
So, are there any ways to increase the ROI of a given piece of software?
The short answer is yes.
- Reduce costs. At the highest level, there are only two ways to increase ROI: you can reduce costs or increase value. Accordingly, you can typically push ROI higher by reducing the cost of your software, all other things being equal. You can do this by negotiating with the developers, earning new discounts, or reducing your internal costs by streamlining things like training and maintenance.
- Access more features. You might be able to get more value out of your software by accessing and fully utilizing more features. Most modern software products are chock full of features, but you might only be using a small percentage of them. Make sure to take full advantage of whatever unique benefits this software adds.
- Train and educate users. Devote some time to training and educating your users. Your employees won’t be able to maximize the value of your software unless they fully understand how it works and how best to use it.
- Integrate more effectively. By integrating this software more effectively with other software your organization uses, you may also be able to reduce costs and increase benefits. This is especially true for large organizations with complex tapestries of technologies working together.
- Automate what you can. Automation is potentially very valuable, as it can simultaneously eliminate manual effort and reduce errors. If you’re using software with automation features, use it in every area possible.
- Optimize your workflows. Pay close attention to any workflows relevant to the software you use so you can optimize them for efficiency. Eliminating unnecessary steps or reshaping your processes can sometimes have a massive impact on your bottom line.
- Study analytics. Finally, study analytics to see how your users are using this software. Are there things consistently precluding you from reaping more rewards?
The Alternatives
If you can’t increase the ROI of software, you have a couple of options. If the software is currently generating a positive ROI, it’s probably worth keeping, at least for now. However, it’s a good idea to do some exploratory research about competing products so you can see if there’s a superior version on the market. In many cases, you can find similar pieces of software that can offer even more value for your money.
On the other hand, if your software has a neutral or negative ROI, it might be time to consider whether it’s worth keeping it all. In some cases, simply terminating your agreement is the only necessary action.
Calculating software ROI is one of your best strategies for estimating the value of your business’s technologies and tools. However, increasing the ROI of a piece of software can be tricky in many circumstances. Accordingly, you’ll need to consider a wide range of variables when evaluating your software and deciding how best to move forward.
