Hi I thought I would
write a series of articles on a topic that I believe is becoming absolutely
critical in the software development industry, that being the magical and
mysterious ROI (return on investment) in software development.
As the owner of a
programming company here in South Africa, I decided at the outset of the
company that a rule of thumb for accepting any software development project
would be that I would need to figure out how to measure the ROI in that
particular project. Now you may or may not be surprised to know that in most
instances my clients don't actually think of this measure before taking on the
project, they know that they have a business problem or business need that
needs to be solved with technology and are willing to pay an amount of money
for that. Experience over the years however has shown me that the best way to
retain that client in the long term and or to make more business from that
client is to prove a ROI in some way on that software development project.
I find this measure to
be critical because for my companies purposes it shows exactly how successful a
project is to my client in monetary terms. The bigger my impact through the
software I develop, the more successful I have been at satisfying that clients
need, the easier it is for me to go back to that client and offer further
services. Contrary to popular belief, I don't believe that a project coming in
on time or under cost is a great measure of the success of that project at all,
this is typically what IT companies do. If I really want to do a great job for
my client then I always intentionally build a monitoring tool into the software
I develop for them and that tool must track the ROI for the client in some way
and present a report to the client whenever they want to see what this piece of
software really is worth to them, be it through savings, additional income,
time savings, it doesn't matter so long as you track the value.
So how do you go about figuring out the ROI on software development project?
So how do you go about figuring out the ROI on software development project?
This is the difficult
portion because it requires listening to the clients need carefully and scoping
there need correctly, once you have done this, it should become fairly obvious
what the client is trying to solve by having the software developed, this
should then be a clear indication of the measure to be used on ROI. For
example,a client of mine wished to have a system developed that automated the
process of allowing shareholders in various properties to swap there owned
weeks with each other. Before the client came to me they did this process
manually, ie called there shareholders to find out if they were willing to
exchange a week with a fellow shareholder that already gave an indication that
they wanted to swap there week etc. This took a lot of time and for the
administration fee that the client asked to do this, I suspect the profit was
very little. Once we had developed the system and allowed the shareholders to
interact with each other through the website instead of the web system, the ROI
was very clear, why?
-We tracked each
exchange in the system, each exchange has a monetary value associated to it.
-The clients telephone
bill dropped significantly
-More swaps occur
because of the ease at which shareholders can swap weeks, instead of having to
go through a process of calling the company then waiting etc, this increase in
sales is measurable
-Because the client
offered the service electronically he could increase his administration fee.
All this information the
client could get through there system thereby ensuring that he could very
clearly see what his ROI was.
Conclusion
Conclusion
I believe without a
doubt that if you truly want to complete a software development project
successfully for a client, then you need to build a ROI tool into the software.
Convince the client to do this, if you cant do that then build it free of
charge, but make sure that you get your client to look at these figures. In the
long term this will have a positive effect on your business and keeps your
software development projects honest in terms of creativity and keeping the
clients needs in mind constantly.
Please offer your
comments and views on this topic, I am very sure that peoples opinions and
views on this vary quite considerably, I am very willing to listen to other
opinions in this regard.
In my next article on
ROI and software, I will be describing more specifically how you can measure
ROI on certain types of projects, in this case it will be how to measure ROI
precisely in SMS campaigns.
All Programming
Webmaster
Article Source: http://EzineArticles.com/?expert=Rory_Van_Der_Berg
Article Source: http://EzineArticles.com/3228945
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