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4 steps to calculating ROI in Software Development

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.

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4 steps to calculating 
ROI in Software 
Development 
August 2014
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 
to invest.
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 
set timeframe 
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 
Tax Credits)

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4 steps to calculating ROI in Software Development

  • 1. 4 steps to calculating ROI in Software Development August 2014
  • 2. 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
  • 3. 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 to invest.
  • 4. 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
  • 5. 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 set timeframe Revenue growth investments tend to be projected over the longer term Either way agree the timeframe and set regular milestones to track real ROI
  • 6. 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 Tax Credits)
  • 7. Step 4: Choose the right supplier Do you undertake the project in-house or engage a software development company? If you do put out a tender for the project ensure: The supplier understands your ROI measurement criteria and can deliver against them 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 development project
  • 8. Find out more about Software Development Services from MSM twitter.com/msmsoftware msmsoftware.com/blog Company Page – MSM Software