Tuesday, February 23, 2010
Wednesday, February 10, 2010
In this time of tightening budgets and layoffs the decision to bring new solutions to the organization will be heavily scrutinized. A simple return on investment (ROI) analysis can tell you how long it’s going to take for the new solution you are considering to “payoff”.
You can Google ROI and find millions of white papers and information on how to calculate return on investment. In our world ROI, in its simplest form, is the payback period from investing in a new solution, implementing a new process, or retooling an existing process. In other words, if you invest $50,000 into a new solution, how long will it take to recoup the $50,000 through cost savings and/or increased profits? The shorter the payback period, the sooner you’ll start seeing a ROI.
The goal of changing a system or process is to make it more efficient which will in turn save money and/or increase profitability. Typically the biggest bang for your buck will come from automating a very manual process. Efficiencies are mostly gained by reducing labor costs, reducing errors, and forcing compliance to a process. A simple ROI calculation can be done as follows:
[Total Cost of “New” Solution] / [“Current” Monthly Operating Cost – “New” Monthly Operating Cost]
= ROI in months
Both soft and hard costs should be considered when putting together an accurate ROI analysis. Your threshold for ROI will more than likely vary on each project depending on the investment and the pain caused by business as usual. Waiting a year to recoup $20,000 is probably not acceptable, whereas, $200,000 may be more palatable.
WEVO Group has successfully implemented Symantec Workflow processes at a number of organizations. For more information on the specific processes visit our website at http://wevogroup.com. If you have processes that you are looking to automate and need help putting together a simple ROI analysis, we would be happy to help. Email me at firstname.lastname@example.org.