ROI analysis is an indispensable step when your business decides to invest in software. Because this is an important decision and this investment needs to be carefully considered, there must be assurance about the benefits it brings to the business. To evaluate the real benefits of investing in software. In this article, we will learn with Viindoo about ROI analysis, the benefits of applying ROI analysis, as well as the steps to perform this analysis.
What is ROI analysis for software development projects?
ROI (Return on Investment) is an index that measures the profit achieved compared to the amount invested. It shows the ratio between the profit earned and the cost of investment. ROI analysis is the process of evaluating investments and calculating expected returns from these investments. The results of ROI analysis will help businesses get an overview of the benefits they can gain from investing in a specific project or product.
Before investing in software, businesses need to clearly define their goals and investment plans. This includes evaluating factors such as cost, implementation time, efficiency and the benefits the software can bring to the business. Analyzing ROI before investing will help businesses get an overview of the benefits and risks of software investment.
Why is it necessary to analyze ROI when implementing software?
Applying ROI analysis when investing in software deployment brings many benefits to businesses. Here are the main benefits that businesses can gain when applying ROI analysis:
Make accurate investment decisions
ROI analysis helps businesses get an overview of the benefits and risks of software investment. The results of this analysis will help businesses make accurate, complete and long-term investment decisions. It also helps businesses evaluate their financial ability to invest in software and have a reasonable plan.
Plan and budget accurately
ROI analysis helps identify the features or investments that have the highest ROI, i.e., provide the best return relative to cost. This helps businesses focus on features with the highest profit potential and optimize resources. From there, determine the implementation plan and scope of implementation and calculate the budget with the corresponding scope.
Optimize investment costs
ROI analysis helps businesses evaluate investment costs and expected profits from software investment. This helps businesses optimize investment costs and make effective investment decisions.
For example: After calculating ROI, the results show that: Digitizing the payroll process has a high ROI, adding printing forms to serve secretaries has a low ROI. At this time, with a limited budget, businesses will choose to digitize the payroll process instead of adding printed templates to have the most suitable cost with the highest value.
Evaluate software application effectiveness
ROI analysis allows businesses to evaluate the effectiveness of software after implementation. The results of the analysis will show whether the software meets the set goals, thereby helping businesses adjust and improve business operations.
>>>> Learn more at: ERP implementation plan: How to Achieve Efficiency
Common mistakes when analyzing ROI
During ROI analysis, there are some common mistakes that businesses need to avoid to ensure accurate analysis results. Here are common mistakes when analyzing ROI:
Do not calculate the costs involved
One of the common mistakes when analyzing ROI is not fully calculating the costs associated with software implementation. This can lead to making incorrect investment decisions and cause damage to the business.
Do not calculate future profits
Calculating future profits is important in ROI analysis. If only calculating profits right now, businesses will not be able to evaluate the true benefits of software investment.
Don't calculate the risk
Investing in software can also bring risks to businesses. However, many businesses do not calculate this risk during ROI analysis, leading to incorrect investment decisions.
>>>> Learn more at: The risks of ERP implementation and how to minimize them
ROI analysis process at Viindoo
Viindoo is a company providing overall business management software. With high experience and expertise, Viindoo has applied ROI analysis to evaluate the benefits that the software brings to customers.
Viindoo is always committed to bringing the highest benefits to customers through applying ROI analysis before deploying software. Viindoo's team of experts will support customers in the process of analyzing and providing the most suitable solutions for each business through the following steps:
Launch ROI analysis
Help all project participants have a comprehensive picture of the project by setting accurate expectations, identifying goals, motivations as well as risks that may be encountered in the future.
Here, Viindoo uses the mind map tool:
Step 2: Assess the current situation
“Show me how you work” is the main goal of this stage. Viindoo will work with 1 key user from each department to better understand their current operations:
- Review all existing flows on the business's existing software (if any, save them with screenshots and video clips), and take samples of each report and sample data (names of 5 products, customers, departments, etc.);
- Search and correctly identify existing pain points;
- Then configure the Viindoo POC system with the help of Viindoo Customizer without the involvement of a programmer, to use for brainstorming sessions with key users (build mockups for things that Viindoo Customizer does not respond).
Here, Viindoo uses the following tool to Interview key users:
Step 3: Come up with solutions and perform demos
After understanding the current status of the business, Viindoo will have a meeting with key users to accomplish the following tasks:
- Validation and validation of the issues should be performed based on the above POC trial (and mockup simulation, if applicable);
- Verify pain points and gaps;
- Complete the "R-Details" Sheet in the "ROI Analysis": Determine the amount of time each employee in each department must spend on work.
Here, Viindoo uses the ROI Analysis tool:
Step 4: Analyze and calculate ROI
At this time, Viindoo's analysts will calculate information about investment costs (Software development costs, maintenance costs...) and expected profits (Introduction of new software). How much will the application help businesses save?
In addition, Viindoo also organizes "peer review" sessions - conducted by Viindoo Experts and programmers with the purpose of criticizing proposed solutions.
After having information about investment costs and expected profits, calculate ROI by applying the following formula:
ROI = (Profit - Investment Cost) / Investment Cost * 100%
The results of this calculation will show the ratio between profit and investment costs, thereby helping businesses evaluate the effectiveness of investment.
Here, Viindoo uses the ROI Analysis tool:
Step 5: Present the results
Present the final results to the customer through an ROI Summary and present the product on a demo software version (or use a built mockup simulation in case a demo software version is not available).
Tools used: ROI Summary:
Implementation & Consultancy Service
Consulting, orienting the implementation, training on using Viindoo Software to manage your Business.
FAQ
ROI analysis is essential when investing in software to ensure efficiency and cost savings for businesses.
Để tính toán ROI đúng cách, doanh nghiệp cần xác định chi phí đầu tư và lợi nhuận mong đợi từ việc đầu tư phần mềm, sau đó áp dụng công thức tính toán ROI.
Yes, Viindoo offers ROI analysis as a service. For large businesses, you can perform ROI analysis by Viindoo before making investment decisions.
Conclusion
ROI analysis is an important tool to evaluate the benefits of software investments. It helps businesses make accurate investment decisions with integrity, optimize investment costs and evaluate the effectiveness of software after deployment. Applying ROI analysis also helps businesses avoid common mistakes and properly calculate profits and risks. Viindoo is one of the companies with high experience and expertise in applying ROI analysis to customers, bringing the highest benefits to businesses.
