Modern business owners typically face pressure to acquire and integrate many different software products into their technological ecosystems. When used properly, these software investments can lead to considerable increases in productivity, efficiency, and even capabilities. But are you getting the value from your software investments that you should? And how can you tell?

What Is Value? The ROI Calculus

What does it mean for a piece of software to be valuable? This is a hard question to answer since you’re usually looking for each piece of software in your business to serve multiple functions simultaneously. Your software may help you achieve a certain goal, but does that make it inherently valuable? And do different organizations have different definitions of value?

The straightforward solution to this dilemma is to calculate the overall return on investment (ROI) of your software. Essentially, your goal is to calculate, as objectively as possible, how much value you’re getting from your software compared to how much you’re spending on it.

The benefits can be calculated with the following:

Money savings: How much money does this software save you? Does it prevent you from needing other people or resources? Is it likely to save you even more money over time?

Time savings: How much time does this software save you? Does it automate tasks that would otherwise be relegated to busy, important people? Does it offer streamlined functionality that reduces the number of hours that different projects take?

New revenue opportunities: Does this piece of software generate any new revenue opportunities for your business? And if so, how much money does it generate on your behalf?

Threat prevention or mitigation: We also need to consider the possibility that your software prevents or mitigates certain threats. This can be difficult to calculate. For example, the average cost of a data breach in the U.S. is now $4.45 million. It’s impossible to tell for sure whether your software, by itself, fully prevents data breaches or how many data breaches it prevents. However, you can very loosely estimate additional benefits in this category.

Future value: Finally, think about the potential future value of this software. Are the developers actively supporting it? Do they anticipate new features and support in the future?

We also need to consider the costs:

  • Subscriptions and direct costs. How much are you paying to keep this software running?
  • Time expenditure. How much time do you spend on training, education, and on using this software on a regular basis?
  • Maintenance and integration. Are there any other maintenance, integration, or secondary costs you can think of associated with this product?

Pushing the Value

After ballparking the ROI of your software, consider whether you can push that value further. In other words, you may have a positive ROI, but are you getting as much ROI from this software as you feasibly could?

Consider the following:

Training and Education

Sometimes, you can get more value out of a piece of software just by helping your team members understand how best to use it. Providing further training and education may be exactly what you need.

Feature Utility

Are you taking full advantage of all the features this software has to offer? Oftentimes, businesses get stuck using only the basic features, while ignoring even more impressive, advanced features.

Customizations and Beyond

Are there ways that you can customize this software to make it even better? Can you integrate it with your other systems?

Another Layer of Complexity: Competition

One more layer of complexity we have to consider is competition. Imagine that you’ve extracted the full potential value of your software product; are you sure there isn’t another software product out there that could give you even more value?

Here’s how you can approach the possibility:

Research new competitors. Start by taking a look at the competitors that currently exist. A simple Google search can give you a list of some of this company’s top contemporaries.

Conduct free trials. Free trials aren’t always the right move for SaaS businesses, but they’re still incredibly common – which is good for you. Take advantage of these free trials so you can experiment and see whether any of these software platforms are worth considering.

Forecast potential improvements. Using the same ROI math you used before, forecast potential improvements to your company’s software ROI if you made the switch.

Calculate the costs of switching. Are there any costs or obstacles that jeopardize the move?

Most businesses aren’t getting the full value possible from their software investments, either because their ROI isn’t as high as it should be or because there are competitors that can do the job better. If you’re willing to crunch the numbers and ask these critical questions, you can put your business in a much better position to succeed.