Software and ROI

What would be the final objective of
implementing software in your organization? Definitively to increase performance
and productivity, being the final, I thing,  the most important one. Every
single task can be done manually, even finding your credit report in millions of
papers, in a big close room, can be done.

But not every software in your company will
bring the same benefits it could bring to other companies. An image editing and
processing software could be a huge benefit for publishing and media companies
while not a lot for the financial industry. It depends on the process you are
trying to automate and what are the costs of executing this process.

One way you can know the benefits of
implementing a software is calculating the Return Of Investment (ROI) of the
project. What is the actual cost you will be reducing by implementing the
software. Let’s make an example:

A vacation request from an employee needs the
approval of his direct supervisor and the approval of the HR department. After
your boss questioning for two days about the necessity of you taking that long
deserved vacation and your involvement in the project of reducing the amount of
pencils on the companies employees desk, he finally approves your application.
Then HR department also investigates and approves the request. Calculating the
hour cost of our boss in $100 and the person in HR department in $95, we could
have the following table:

Activity Hours Cost
Supervisor Approval 5 500
HR Approval 4 380
Subtotal   880
By 100 request a

We have calculated the actual cost of
processing vacation request in a total of 88,000 thousand a year. Now let’s
assume that you implemented a workflow software with electronic forms
integration and have automated the whole vacation process. You could reduce the
time taken routing the actual paper form, reviewing and locating  the form
by 50%, then you could have the following table:

Activity Hours Cost
Supervisor Approval 2.5 250
HR Approval 2 190
Subtotal   440
By 100 request a

You are saving 44,000 thousand that could be
use in the business for raising wages. Your return on investment is 44,000
thousand if you implement this kind of software. One of the good things about
workflow and process automation software is that you begin realizing the value
of it since day one of the implementation, and
this is only one process. Automating other processes through out the
organization will lead to fewer costs also.

In an enterprise organization, the benefits of
this kind of software are huge because of the reducing costs they lead. But I
think that small and mid businesses also take a huge benefit. Not only are they
reducing costs, but they are also building the infrastructure for a competitive
advantage against big corporations. For example, in SMB, the HR department isn’t
typically big. As the company grows in amount of employees, you would normally
need to increase the HR department, but this is not true if you have automated
the core processes of HR.

The benefits are even higher when you automate
core processes of your business, like software construction in a software
company, loan requests in a bank, legal cases in a law firm, etc.

Always calculate the ROI and the benefits the
software will bring to your organization.

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