What is ROI for Software and Applications?

It is crucial to purchase software and applications with a high Return of Investment (ROI). You need to decide on the ones that will benefit you the most. Since the costs are high, you have to consider options carefully.

To convince your company, calculating the return of investment of the software is the brightest way. You would like to calculate it right to make a wise purchase. The ROI calculation is complicated, thus be sure that your calculations are correct.

What is ROI (Return of Investment)?

ROI stands for Return of Investment, and it is a specific calculation. It is the relationship between the benefit and cost of an investment. The calculation is always the same, no matter what the investment or the sector is.

How to calculate ROI?

The formula of Return of Investment calculation is as follows:

ROI = (Gain of Investment) - (Cost of Investment) / (Cost of Investment)

With this formula, you can calculate ROI for any investment that you are considering.

Gain of Investment

Most probably the software that you will purchase will help you do something that you were already doing in a more efficient way, this can be considered as the Gain of Investment. You won't be wasting your time anymore, with that time you can do some extra work that will return you as money.

Cost of Investment

The most obvious costs of investment are the money you need to spend for getting the new software and for maintaining it. These can be fees of license or subscription and technical support services.

There are some more subtle costs such as educating and training your staff as well. These lead to their time spent in these lectures whereas they could be doing more productive things. Also, at first, there will be a decrease in productivity since the staff will be needing some time to adjust to the new software.

It would be best if you calculate both the worst and the best-case scenarios. With these calculations, you will have an idea of what the actual ROI of your new software will be. The actual result will be somewhere in between.

Don't forget to do your ROI calculations for a specific time period. Most probably the first month will have the lowest ROI due to the high costs of implementing it and the low productivity of your staff.

Effect of IT Asset Management on ROI

IT Asset Management helps companies to track their IT assets. It is important to track assets in a fast and efficient way. With ITAM you will know what you have, you won't be having needless complexity anymore, you will minimize technology risk and maximize operational productivity. The ROI of IT Asset Management is quite high in most cases. You can calculate your own ROI by using the formula given above. To learn more about IT Asset Management, you can check our knowledge base page.