Software development may look expensive if all you are doing is looking at a single dollar figure without comparing it to anything, so how can you tell if it is worth doing?
There are two main components to look at, the easily calculated direct return on investment which is, how much is a task costing now each time my staff do it and afterwards how much
There are two main components to look at, the easily calculated direct return on investment which is, how much is a task costing now each time my staff do it and afterwards how much
Direct Return on Investment
ROI Calculation |
Basic values |
| Task time = Time it takes 1 person to do the task once. No Workers = Number of workers doing the task every week. Times per week = number of times per week each person does the task Execute Cost = Task time * Hourly Rate Weekly Cost = Execute Cost * Number of Workers * Times per week ROI = Weekly Cost * Weeks for payoff |
Cost to the business (with on costs). $50K base Salary = $45 per hour $100K base Salary = $90 per hour Real working time: 6-7 hours per day (not 8) 48 working weeks per year 72 working weeks per 18 months |
Example
A report takes 3 hours each time to find data and massage information.
We have 2 people costing roughly $50 per hour doing it once a week each.
So if we automate this process we see:
Execute cost = $150 = 3 * $50
Weekly cost = $300 = $150 * 2
ROI of 1 year = $14,400 and ROI of 18 months = $21,600
This should be a reasonable starting point for your decision.
We have 2 people costing roughly $50 per hour doing it once a week each.
So if we automate this process we see:
Execute cost = $150 = 3 * $50
Weekly cost = $300 = $150 * 2
ROI of 1 year = $14,400 and ROI of 18 months = $21,600
This should be a reasonable starting point for your decision.
Breakeven
From this table we can see a few common scenarios and the expected break even values.
Hidden Return on Investment
Once you have a feel for the base line ROI you can start to look at what are the greater benefits gained from automation.
Here are a few examples to help start your thinking.
Does real time responsiveness change relationship?
Capturing more data allows for more insights
What is the value of greater consistency and cleaner data?
What “higher value” work can my people be doing?
Now that it costs $2 per execute rather than $200 what can that mean?
Here are a few examples to help start your thinking.
Does real time responsiveness change relationship?
- You become the default choice for customers (like Google).
- Your customers interact with you more frequently, its a reduced effort for them too.
- Customers recommend you because you make them look good
- Redgum provided a specific "log an issue" screen to one program, the feedback loop this created generated $150K+ per year in additional work.
- Making self service simple means people were more inclined to do it, responding quickly means they see the results and were motivated to put the next item in.
- Live web page to transact and watch progress online VS send an email or ring and wait 5 days before hearing
- If your always there, always responsive your customers relax with you
- Self service means clients are not left guessing and imagining the worst
Capturing more data allows for more insights
- Measure you can manage. If you can see it you can fix it.
- Redgum discovered a 25% gain in billing through improved tracking.
- A identified daily and weekly patterns of usage which enabled better resourcing decisions to be made
- Trust your data, trust your processes, trust your company.
- This shows through in everything you do.
- Raise your image, raise your quality, raise your price.
What “higher value” work can my people be doing?
- Normally A LOT
- Projects you can’t get to now
- Customers you could be talking to.
- New product lines Next round of improvements
Now that it costs $2 per execute rather than $200 what can that mean?
- Faster feedback.
- Don’t wait a week find out now.
- Increase the volume of transactions safely.
- Respond faster and more confidently
ROI Hidden calculator
Calculating the value gained from being able to execute more frequently.
This shows that by making it extremely cheap and quick to execute now means executing more often is far more viable and the feedback benefits to the business can be profound.
So after all that, is it worth it?
That still comes do to your situation, we would be more than happy to sit down at no obligation for an hours workshop to help you work through and answer these questions.
