Proving Return on Investment: A Step-by-Step Analysis of Tech Spending

By Langford, Bert N. | Folio: the Magazine for Magazine Management, April 2010 | Go to article overview

Proving Return on Investment: A Step-by-Step Analysis of Tech Spending


Langford, Bert N., Folio: the Magazine for Magazine Management


RETURN ON INVESTMENT, or "ROI" can be one of the most difficult things to legitimately prove to top management when it comes to justifying software for cutting costs, gaining new sales markets or both.

But proving ROI need not be as difficult as you think. Take the time to look closely at the present processes and identify where you believe there is wasted manpower to perform different tasks and areas where an excessive amount of manual effort goes in to the production processes. Once you can identify these two areas, you can then prepare an RFP to the vendors serving the subject area(s), identifying by item what you want to achieve.

The trick is to remain objective as to expectations through a thorough analysis of what your company requires today versus after ROI results come in.

Three Steps to Achieving Realistic ROI Goals

1. Designate a project management team composed of three or more executives including the department head(s) responsible for the end users operating the software, someone from IT to assist the end user department head in preparing the project plan from the software side including internal IT requirements; and a top executive responsible for bottom line results who can help in passing judgment and provide direction in terms of establishing ROI feasibility from a financial perspective.

2. The Project Team would be responsible for the project plan that will result in a valid and objective projection on benefits and deliverables proving first year and additional year savings and/ or new income and after the cost of the software, including maintenance/ support, is factored in.

3. The Project Plan would include identifying on a line item basis the workflows and software that are currently in use versus what happens after the vendor's software is fully implemented to identify the specific deliverables and their contribution to ROI. Look in particular for integration with other software used by your company (including Excel) and even with the printer as key deliverables.

When the results rough draft can be made available to the software vendor, the vendor should verify your work in terms of its software's capabilities; as well as provide conditional safeguards for the correct use of its software where otherwise user deviation will compromise or prevent any specific ROI deliverable. …

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