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Thoughts on Software ROI (return on investment)


According to software ROI (return on investment) specialists, a new investment in software makes sense if it does one of the following: 1. Provides efficiency gains that reduce overhead or allow you to do more without adding resources. 2. Puts you in compliance with legal or contractual requirements, decreases security risk or makes your technology compatible with that of your clients or customers. 3. supports a new strategic initiative (such as a customer loyalty program). 4. Provides increased capacity or functionality to allow your business to grow. As they must do with any major investment, finance and technology leaders must develop a return-on-investment (ROI) model to justify software purchases. In many cases, organizations find it difficult to identify the indirect benefits and costs associated with software implementation.

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What is the software's full cost? The initial purchase price may be only the beginning of a software investment. Costs for licensing fees, maintenance, implementation, staffing and training can be part of the total cost. For instance, software maintenance and support contracts may cost as much as 20 percent of the initial license. Who will manage the software? Small businesses don't have an army of IT people to support a product. They want software that is easy to modify, where users themselves can make changes.

What features will we actually use? Many small businesses let vendors tell them what they need, or sell them on the benefits of new features, rather than first considering their business needs and then asking how software will fill those needs. A number of factors may make it difficult for an organization to develop an enterprise software ROI model.

  • Type of software. Depending on the type of software, a different ROI approach should be developed.
  • Hidden benefits. Technology benefits are often hard to identify and may depend on how the software will be used.
  • Hidden cost. Many costs associated with technology implementation are hidden. These hidden costs can occur over the useful life of the technology and might include expenditures such as support, maintenance, and training.


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