- We review some of the highest-ranking sources on software ROI to answer the question of the quality level of information on ROI.
We review some of the most popular articles on software ROI to understand what is generally available to those searching on this topic. Our own site has several articles that rank high for a search on “software ROI,” however, we will leave our own articles out of this analysis.
See our references for this article and related articles at this link.
Article #1: Forbes’ Return on Investment on a Software Purchase
This is an article by an author how appears to know nothing about the topic. I believe it was a paid placement only designed to drive business to the author’s consulting web page.
Article #2: Software Marketing Advisor’s Calculating ROI
This article does nothing more than put together some of the categories around ROI.
Article #3: Capterra’s ROI Accounting Software
This article deals with the topic at a very high level of abstraction.
Article #4: Demonstrating Value’s Calculating ROI New Software
This is not really an article, but only have the very basics explained, and then has a link to an ROI calculator that does not have much thought put into it.
Article #5: RedTeam’s ROI Calculator
This is an article that contains passages like this.
Properly calculating the investment made in the technology platform(s) for your organization is important in order to get your numbers as accurate as possible. You not only need to account for the software itself but also its implementation cost, the time invested internally to set up, and time invested to train and roll out to your team.
You also need to consider possible servers, hosting costs, data plans, and equipment costs when figuring out the total investment you are planning to make.
It then has a link to a calculator, that does not send you or guide you to a calculator.
Article #6: Clearpoint Strategy’s ROI Reporting Software What You Need to Know
This article provides a few examples but is close to content free.
Article #7: CIO’s Calculate ROI for New Software
This article makes some peculiar assertions.
Some software markets develop rapidly. Software that can be rolled out quickly is more likely to be replaced sooner than software that takes a long time to roll out. The reason is that a short rollout has less work, cost, and business disruption, and that makes it easier to move to a better product if needs change.
For example, for software that is operational in 1 to 3 months after initial deployment, you might use a time horizon of 3 years. On the other hand, for software like ERP that may take a year before being fully operational, you might use a time horizon of 5 years. Bear in mind that there will be minimal returns for the first year if the software takes a year to roll out, so a 5-year time horizon only has about four years of returns.
What does this have to do with the ROI however? It is true that one must estimate the duration of use, but this is a strange way to get to this point.
This is overall a disjointed article that almost appears incomplete. But it is the best article we read up to this point on ROI.
Article #8: Acumatica’s ERP ROI Calculator How to Get a True Return
This article started out reasonably, but then fell into a hole when it made the following comment.
At Acumatica, we decided to take a different approach by using current data done on research across a wide variety of companies. One of the most respected industry experts is an analyst firm called the Aberdeen Group. We recently highlighted one of their Whitepapers, The Cost of Doing Nothing: Why You Can’t Afford to Sit on an ERP Software Decision. It explores the possible negative results businesses experience when they choose not to implement a modern ERP system.
Aberdeen Group is not at all a respected entity. We have analyzed their output and have found it to be very poor quality. Naturally, this is an ERP vendor, and so they like the fact that Aberdeen Group wrote a white paper saying that customers have to implement ERP. Aberdeen Group has gotten out of the business of performing IT analysis, which is good.
What Does the Research into ERP ROI Show?
Our research into ERP systems found that studies going back to the beginning of ERP software have not shown a positive ROI as is covered in the book The Real Story Behind ERP.
Article #9: Axia Consulting’s Avoiding the Two Biggest Mistakes in Software ROI Analysis
It was difficult to see how this article applied to software TCO and could have been a generic article on any type of TCO.
Article #10: Vertitechit’s ROI for IT How to Calculate and Measure and Improve ROI On IT Investments
I was completely lost reading this article. In the end, the author places a series of costs. ROI is the return on the software versus the costs. It is not just costs.
Article #11: BambooHR’s How to Measure HR Software ROI for Your Company
This article just provides a high-level understanding of the topic. Here is a sample.
4) Administrative productivity: Modern HR systems are a great way to replace outdated workflows and paper-based record-keeping, especially when products offer online document storage and employee self-service. According to a report from 2011 (the numbers are probably higher now), large companies spent an average of $1,400 per employee per year on in-house administration of payroll, time and attendance, and health and welfare. By “outsourcing” some of these tasks to a human resource management system, businesses can drastically reduce costs. The HR solution keeps the gears turning while employees focus on more mission-critical goals.
Article #12: Accusystem’s ROI Calculator
This is not specific to software, and just has a link to a generic ROI calculator download.
Article #13: Walk Me’s Software Productivity ROI
This article had some interesting statistics included.
According to the U.S. Bureau of Labor Statistics, employee productivity barely grew 0.3% a year over the course of five years.
The five leading workplace factors that hurt productivity:
Lack of access to digital tools
Staples research shows that out of every four U.S. employees, three believe employers don’t give them access to the latest digital tools, which they need to do their job efficiently.
The modern employee uses an average of 9.39 apps per day, according to a survey of over 900 global business professionals. But the volume of technology is proving too hard to handle — 43% of respondents reported feeling “app overwhelm.”
Poor digital literacy
Altimeter discovered that 31.4% of executives and digital strategists surveyed listed their top challenge as “low digital literacy or expertise among employees or leadership.”
Lower employee engagement
When employees feel like their work tools are limiting their ability to be productive, the natural reaction is to disengage. According to a Gallup poll, only three in ten U.S. workers are engaged. This “stagnating engagement” comes at a steep price: $450 to $550 billion.
Employee resistance to change
When your workforce feels ill-equipped to improve their digital literacy or maximize proficiency on your software, they will resist the introduction of new tools and never fully leverage your digital arsenal. This automatically caps your software ROI at $0.
This is one of the few articles to write anything realistic or negative about software ROI.
Article #14: Feld’s Right Way Software ROI Analysis
This article is a case study of Yesware. And I wholeheartedly agree with this quote.
And like most startup business plans, ROI slides are almost always fake. The salesperson or their marketing department has no experience to draw on or data from which to extrapolate. Moreover, there’s no accounting for the time value of money, the customer time required to deploy the service, or the risk of time wasted if the deployment doesn’t go well.
The article had a few interesting things to say, but it was very high level. However, at least it was realistic.
Article #15: SpaceIQ’s Facility Management Software ROI
This is one of the articles that just lists things to look for in ROI.
Software: This is the initial cost of your software license or ongoing subscription. Many SaaS models employ one or the other. For example, a one-time upfront cost to activate the software at a specific tier or a low monthly flat rate for a fully unlocked version.
Implementation: The total cost of implementation is the sum of any costs required to deploy and use your software. This may include additional software, cloud services, and labor costs. Most importantly, factor in training costs.
Hardware: Often, FM software deployments occur in tandem with an Internet of Things (IoT) rollout. It’s a natural pairing, since FM software benefits dramatically from integrated hardware and vice versa. Consider any peripheral hardware costs and account for them. Sensors, beacons, switches, relays, hubs, and specialized equipment like access control all fall under this cost center.
As you can see, this is just a high-level description of how to approach ROI.
Article #16: Business Wire’s Absolute Helps Enterprises Boost Software ROI
This is a press release and contains no information on ROI.
Article #17: Ecesis’s EHS Software Return on Investment ROI
This article has some basic calculations like the following.
Step #5 – Calculate the ROI
Plug the savings from Step #4 and Costs from Step #3 into the following equation to determine the ROI of the software:
ROI = (Cost Savings of Investment) / (Cost of Investment) = $24,440 / $5,040 = 4.84 (or 484%)
It is a very basic article with not a lot of say on the topic of ROI.
Article #18: Tech Republic’s ROI Equation for Development Projects Not to Forget
This is a highly abstract article that has quotes like this.
Formulate the right equation
To sum up, it’s important that you go beyond the basic ROI calculation of, “We spent $X on salary to develop the product and saw $Y in sales of the product, so the ROI is $Y – $X and the profit margin is $X / $Y.” These types of simplistic calculations make a lot of valuable development projects look like a waste of time.
There is like most of the other articles, little to it.
The Logic for Stopping at This Point
There was really nothing new coming from any of these articles. And as we looked at more of the articles down the list in the search results. It didn’t seem as if there would be anything else coming down the pike if we continued to read more articles. So at this point, we decided that this would be where we would stop.
So now, let us get into the scores.
The Table of Our Scores
The following is a tabular form of the articles we just covered.
ROI Articles Found On Line
|Our Rating 1 to 10
|Return on Investment on a Software Purchase
|Software Marketing Advisor
|ROI Accounting Software
|Calculating ROI New Software
|ROI Reporting Software What You Need to Know
|Calculate ROI for new Software
|ERP ROI Calculator How to Get a True Return
|Avoiding the Two Biggest Mistakes in Software ROI Analysis
|ROI for IT How to Calculate and Measure and Improve ROI On IT Investments
|How to Measure HR Software ROI for Your Company
|Software Productivity ROI
|Right Way Software ROI Analysis
|Facility Management Software ROI
|Absolute Helps Enterpries Boost Software ROI
|EHS Software Retrun on Investment ROI
|ROI Equation for Development Projects Not to Forget
All of the articles reviewed above are quite repetitive.
- We were not able to find very little original thinking among any of the articles.
- Almost all the articles were written in a way that the author was able to put out the minimal level of effort.
- It was not clear from the articles that the authors knew very much about ROI calculation before writing an article.
- None of the articles addressed how difficult it is to arrive at an ROI. And one reason is that it is extremely difficult to obtain a true ROI. And estimating the benefits from the software is complex.
- The available calculators were of shallow quality. And they tended to be extremely generic, such as how does a SaaS application. Compare its ROI to that application if it were all on-premises.
The average score of the 18 articles reviewed was just a little over 2. The highest-scoring articles were from Feld and Walk me that were tied at 5.
Overall, this highlights the low quality of information on software TCO.
What Did We Expect?
We did not have great expectations of what we would find prior to performing this analysis. However, the results are far worse than we would have guessed.
It is difficult to say that any of these articles is worth the time to read. The only way it would be is if you were entirely new to ROI.