Calculating Return On Investment (ROI) for a Software Development project is challenging but, in today’s world where stakeholders want extra reassurance prior to approving investment, solid justification is a must.
In this short SlideShare we will take you through the 4 key steps required to enable you to calculate the ROI for your Software Development project.
4 steps to calculating ROI in Software Development
4 steps to calculating
ROI in Software
Why bother with Software Development ROI?
It enables the real success of the project
to be fairly judged
Helps justify future development projects
It enables Finance to ensure the
organisation gets value for money
How to measure a ROI for your software project
In this document we will take you through
four steps that we believe both IT and
Finance Directors can follow to guarantee
an accurate assessment of the value of a
software project; aiding the decision-making
process, regarding whether or not
Step 1: Interrogate the project
Understanding ROI means understanding the nature of the project.
What ‘type’ of project is it?
Cost saving investments?
Revenue growth investments?
The answer to this won’t impact the
information gathering but, it will make a
difference in terms of assessment period
Step 2: Agree on a timeframe
Real ROI can only be truly understood if it’s measured at key
points over time until the project ends
Cost saving investments tend to have a
Revenue growth investments tend to be
projected over the longer term
Either way agree the timeframe and set
regular milestones to track real ROI
Step 3: Decide how to measure costs
The biggest area of consideration for ROI on software
development is cost
Consider the different measurements that are
used for assessing both cost saving and
revenue growth investments. These include:
Total cost of ownership (TCO)
Cost saving investments
Revenue growth investments
Added value from unlikely sources (e.g. R&D
Step 4: Choose the right supplier
Do you undertake the project in-house or engage a software
If you do put out a tender for the project
The supplier understands your ROI
measurement criteria and can deliver against
That Finance & IT are fully aligned on goals
before you go out to tender
This alignment will more likely result in a
successful and long-term software
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Services from MSM
Company Page – MSM Software