Return on Software Investments

A recent study by the Aberdeen Group indicates that small and medium sized businesses that are investing in ERP (Enterprise Resource Planning) software are not estimating the Return On Investment (ROI). Considering that these "investments" are being made to increase performance of the business, you would think that more businesses would want to see the return. Can you imagine investing in stocks and not knowing what a good return was?

For those that do estimate ROI, less than 25% look at the return after the project is completed.

Calculating ROI for an ERP project may be the challenge. ERP affects so many parts of the business that it is difficult to see the impact after the fact and difficult to project just what will be impacted by the change.

The software change is easy to see, but that is not "the big change". The big changes, are cultural, improved productivity, reduced costs and improved information for decision making.

Most software projects focus on the implementation of the software and on training people to understand what the software does. The original goal is often lost in the activities of implementation. Most businesses acquire software because they feel they have to. While they may have to, to survive, they still need to understand how it will affect their business and because their business is constantly changing, financial measurements can't be the only ones. Questions like: "how will it speed up delivery to my customers?; "how will it improve the quality of service?"; "how will it reduce costs, improve productivity, improve access to information?". If you can visualize the answers to these important questions, you will develop a plan that goes far beyond implementation of the software, and even if you don't estimate ROI, you will get a much better result.

Look here, if you want to see more detail on the study.