Software and ROI

What would be the final objective of implementing software in your organization? Definitively to increase performance and productivity, being the final, I thing,  the most important one. Every single task can be done manually, even finding your credit report in millions of papers, in a big close room, can be done.

But not every software in your company will bring the same benefits it could bring to other companies. An image editing and processing software could be a huge benefit for publishing and media companies while not a lot for the financial industry. It depends on the process you are trying to automate and what are the costs of executing this process.

One way you can know the benefits of implementing a software is calculating the Return Of Investment (ROI) of the project. What is the actual cost you will be reducing by implementing the software. Let's make an example:

A vacation request from an employee needs the approval of his direct supervisor and the approval of the HR department. After your boss questioning for two days about the necessity of you taking that long deserved vacation and your involvement in the project of reducing the amount of pencils on the companies employees desk, he finally approves your application. Then HR department also investigates and approves the request. Calculating the hour cost of our boss in $100 and the person in HR department in $95, we could have the following table:

We have calculated the actual cost of processing vacation request in a total of 88,000 thousand a year. Now let's assume that you implemented a workflow software with electronic forms integration and have automated the whole vacation process. You could reduce the time taken routing the actual paper form, reviewing and locating  the form by 50%, then you could have the following table:

You are saving 44,000 thousand that could be use in the business for raising wages. Your return on investment is 44,000 thousand if you implement this kind of software. One of the good things about workflow and process automation software is that you begin realizing the value of it since day one of the implementation, and this is only one process. Automating other processes through out the organization will lead to fewer costs also.

In an enterprise organization, the benefits of this kind of software are huge because of the reducing costs they lead. But I think that small and mid businesses also take a huge benefit. Not only are they reducing costs, but they are also building the infrastructure for a competitive advantage against big corporations. For example, in SMB, the HR department isn't typically big. As the company grows in amount of employees, you would normally need to increase the HR department, but this is not true if you have automated the core processes of HR.

The benefits are even higher when you automate core processes of your business, like software construction in a software company, loan requests in a bank, legal cases in a law firm, etc.

Always calculate the ROI and the benefits the software will bring to your organization.