How to estimate the ROI of custom software development
If you're a business owner and you're looking to improve your systems (either for your team or customers) by investing in new or updated software then there are some big questions that need to be answered before you get started. One of the first considerations is whether off-the-shelf or custom software is best for your organisation.
As the name implies, custom software is built specifically for your business, tailored to the way you and your customers operate.
These types of projects often require a significant investment and there may be similar ready-made alternatives in the market place. A big factor, but by no means the only one, is Return On Investment (ROI) so it's good to have a handle on that from the outset. So how do you calculate the ROI?
Each company and each project is different so there isn't a one-size fits all rule for running the calculation, it's "custom".
We've compiled a list of the key elements you should consider when evaluating where your ROI opportunities lie:
- Can a custom system support you in achieving day-to-day tasks in a faster way than other systems offer?
- Employee costs are often a company's biggest expenditure - how much time would be saved if all manual and repetitive tasks unique to your business are automated?
- Are there bottlenecks unique to your workflows that could be removed by a custom solution?
- Could a custom solution enable completely new workflows that aren’t otherwise possible?
- What benefits would those workflows bring (competitive advantage, time saving, cost saving, customer satisfaction)?
- Custom development provides a pathway for integration of the various systems you use. This will pave the way for a seamless flow of data from start to finish.
3. Data Integrity
- Is full ownership of all data important to your business?
- If a custom system can be designed to capture additional data, would that be of benefit? e.g. for decision making or auditing purposes.
- Could there be the option to monetise that data if you have enough of it? e.g. becoming a paid-for provider or industry resource.
- Will data duplication and related errors from that be eliminated with a custom system that consolidates all information in one central location?
- Consider unique features and tools that could be custom-built as an offering to customers.
- Making the conversion process as simple as possible for customers will result in less barriers in the sales process and less drop offs.
- Is there custom information that could be tracked that would facilitate better follow-up, conversion and retention of customer sales?
- Planning for the future of your business is important when looking at custom development. Custom developments are able to handle large volumes of data, future proofing your systems for ongoing growth.
- Development can be done in stages adding on new features as the business develops.
6. Staff Retention
- How much of a role do your systems play in the work life of your staff? Could a custom system offer a better experience for staff day-to-day? e.g. faster performance, streamlined, no workarounds or limits.
- If there are ready-made products available, what are the long-term licensing/subscription costs vs cost of a custom build?
- What will the hosting fees be? Typically there will be no licensing fees for a custom-built application because you will own it. However there will be ongoing hosting fees.
- Is there potential to resell/license your custom solution to others in the same industry? This may take additional development and investment to productise, but could become an income generator in itself.
Some of these can be measured in hours or dollars, others are harder to gauge in terms of hard numbers but they may have a very big overall effect on your business.
With custom development, there are no limits on what can be done. It’s best to talk with an expert to find out the full potential and whether custom development could deliver a ROI that would make it a worthwhile choice for your business.