What are some of the most common ways that organizations achieve a favorable return on investment when developing custom software?
On the whole, there are two types of custom software, each with vastly different types of prospective returns. The way you evaluate software ROI will necessarily depend on the type of project you’re undertaking. Let’s examine them one by one.
1) Commercial Products
For commercial software products, your return is going to be based on how many copies of the software you sell. In this case, it’s essential to perform market research up-front in order to ensure that there is actually a market for what you’re setting out to build.
This may sound obvious. Most larger companies have both the experience to know they should conduct market research and the resources to do so – by and large, these organizations are already in the business of selling a product. But many individuals and startups neglect this step in today’s marketplace. It is important to recognize that good ideas or products that fulfill personal needs do not necessarily meet marketplace needs.
As younger, smaller companies set out to develop custom software as a commercial product, there are several more factors they should understand are crucial for any software ROI estimation. In today’s software marketplace, one can no longer simply post a website or upload an app to the major app stores and assume that people will find it. It will be important to budget not only for the development of the product, but also for marketing, maintenance, and support.
2) Business Process Software
Business process software – workflow applications that manage an internal process – are a very different proposition, but the first step is similar. You have to do the research internally and understand the problem that you’re trying to solve, investigating potential solutions so you can build one that achieves the desired effect.
What is the desired effect? This is the crux of the ROI question when developing custom business process software. You might aim to improve the quality of your output, reduce costs, or improve the reliability of your processes. It’s essential you identify how you will measure your software ROI.
This measurement can take many forms. It could be an improvement in profits, or an improvement in the experience of your employees through the simplification of some regular but onerous task. This might lead to indirect improvements in output, as well as improved employee retention – and cost savings in recruitment.
The key is to understand the problem you’re trying to solve. There are many ways to improve your bottom line, but no matter what kind of project you’re pursuing, research is imperative.
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