6 Factors to Consider When Measuring Software Return on Investment (ROI)
Software purchase is an integral part of the alternative lending finance industry in order to maximize profits and fund more loans quickly. However, great software can easily become very expensive. So before investing in a loan management solution, you must consider ROI.
Why Calculations and Measurement are Important
Given the high cost of software, it is imperative to get an attractive return on investment (ROI) on its purchase. You want to be confident that your company is investing money in the right coffers. Hence, you must make fail-proof estimates to convince your company’s stakeholders. Read this guide to learn how to accurately gauge and measure loan management software ROI for your company or business’s sake!
But What is ROI?
We’ve been going on about software ROI, but what does it entail? Let’s break it down for you. A return on investment (ROI) is an essential metric in the finance and investment industry. It is a calculation that details an investment’s cost compared to its benefit.
Calculating ROI
The good thing is that ROI has the same general formula no matter the type of product or investment involved. And this straight-to-the-point formula is:
ROI = (Gain of Investment) – (Cost of Investment)/ (Cost of Investment)
Here is a simple explanation of the mathematical components:
Gain of Investment — This refers to the potential amount of money you may derive from the software investment.
Cost of Investment — This refers to the money and expenses incurred in purchasing, implementing and maintaining your software.
Factors that Impact Software ROI
Measuring software ROI is not an easy feat. It may be not easy to quantify the exact amounts involved. For instance, you may find it challenging to calculate productivity benefits and losses. Because let’s face it, the time taken to install and learn the mechanics of new software is a productivity loss. But thankfully, there are specific considerations that simplify the calculations. These include but are not limited to:
Efficiency — You need to take stock of the product’s functionality. Will it allow your staff to complete more tasks at a faster rate? Will the package features reduce cost compared to the old installation?
Scalability — This considers the software’s long-term growth to your company’s growth. Will the product serve the company’s needs as the company progresses and expands? Your answer will determine if the software is a good investment or not.
Security — You need to consider if the product has exemplary security configurations. You don’t want a security breach that can compromise your system. So, If you make the mistake of working with a product that defies security considerations, it can cost your company a lot.
Training — A software company that offers training services to its clients is a much better investment than one that doesn’t. You should also consider the onboarding process for your employees and how it directly affects ROI.
Integrations — Is the software compatible with your existing programs and platforms, such as marketing automations and CRMs? In cases where a software product is not easily integrated, you may have to spend more money. So, think about how this will impact ROI!
The Takeaway
Measuring software ROI can be as easy as following this guideline! A right step in the wrong direction can have severe consequences. But a right step in the right direction can birth huge software ROI.