How to Get More Value From Your Technology Investments
As a business owner, technology acquisitions are a kind of investment. You’re spending money in exchange for tools and systems that can help your business flourish, often in more than one way.
There’s no inherent guarantee that all your technology investments will be fully “worth it.” So what steps can you take to get more value out of those investments and secure a higher return on investment (ROI)?
The Role of ROI in Technology Investments
According to Cetaris, the ROI of a piece of software, like the ROI of any investment, is calculated using measurements of both the cost and the benefits of the investment. It’s debatably the most important metric for determining how much value a given piece of technology gives you.
If you could concretely measure both sides of the equation, you would end up with a clear picture of whether this piece of technology is a source of value to your organization, and exactly how much value it provides, relative to how much you’re spending on it.
For example, let’s say you buy a piece of software for $100 a month, and it gives you $200 of value every month. That’s a return on investment of 100 percent (or 200 percent, depending on how you want to describe it), and clearly a demonstration that this piece of software is valuable.
But what if there’s a piece of software out there that does something similar for just $80 a month, and because it’s easier to use, you speculate that it’s capable of giving you $240 of value every month. Now we’re looking at a return on investment of 200 or 300 percent (again, depending on how you want to describe it). Obviously, this piece of technology is superior.
ROI is useful because it forces you to answer the question of value as objectively and specifically as possible. It also eliminates some of the problems associated with estimating value, such as being blinded to the costs; if a piece of technology gives you $10,000 worth of value, it’s not automatically valuable, as costs above $10,000 could constitute a net loss.
To get more value out of your technology investments, you need to tip the ROI equation in your favor. You can do that either by reducing the cost side of the equation or increasing the value side of the equation. We’re going to explore both options, as using both together tends to produce even better results.
The Cost Side of the Equation
On the cost side of the ROI equation, there are several measures you can take to facilitate reductions:
- Shopping for competitors. In today’s market, there are usually many different technology producers offering similar technologies. If you’re willing to shop around, you can usually find technology that serves a similar purpose for a lower price.
- Aiming for the minimum viable product. Many people end up overspending on technology because they want extra bells and whistles, even if they don’t have specific plans for how they’re going to use them. Generally, you should strive for the minimum viable product; it’s important to meet or exceed all the needs of your organization, but it’s unwise to spend money on things beyond those needs.
- Ensuring value per dollar spent. You can also balance this side of the equation by ensuring the maximum amount of value for each dollar spent. In other words, you need to find the most efficient technologies in terms of value.
The Value Side of the Equation
What about the value side of the equation?
- Validating needs. You can start by validating your needs so you don’t exceed them. The technologies you choose to solve the problem should, in fact, be capable of solving the problem, and they should do so as efficiently as possible.
- Minimizing redundancy. Some technological redundancy can be a good thing, but you should avoid unnecessary overlap and redundancy. For example, if you have three different software platforms that all functionally do the same thing, you can probably eliminate two of them.
- Ensuring practical use. Just because you have a good system in place doesn’t mean the system is returning value to you. You need to make sure your technologies are being practically and responsibly used; training and educating your staff members is one possible solution to this problem.
General Tips for Success
These are your most important tips for success:
- Start researching early. Fast technology purchasing decisions rarely pay off. It’s important to start the process as early as possible, so you have plenty of time to research the significant factors involved.
- Identify needs. Identifying and validating your needs, before you choose technology solutions, helps you pick the best possible fit.
- Do your homework. Always do your due diligence. Don’t assume that a piece of technology is a good investment just because it claims to do something; prove that it does it, and prove that it does it better than any competitor, given the price.
- Calculate conservatively. When making estimates of costs or value, always try to calculate conservatively. Consider potentially hidden costs and factors that could influence the value you receive in one direction or the other.
- Envision both the best- and worst-case scenarios. Contemplate both the best and worst possible scenarios, so you know the constraints of your equation. If a technology looks good at every point on the spectrum, you can definitely feel good about purchasing it.
- Provide training and education. Training and educating team members on new technologies is important if you want to ensure adoption and consistent use.
- Be ready to adjust. You’ll likely need to tinker with your ROI equation as you learn more about this tech.
If you want your technology investments to pay off, you need to make sure they return ample value to your organization. Staying aware of ROI, reducing costs, and increasing value are the best tools in your arsenal for accomplishing this.
With higher awareness and more tactical decision making, you should end up with much better technologies at the foundation of your business.
Global Banking & Finance Review
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