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Putting a Price on Software “Savings”
Posted By Minda Zetlin On August 1, 2008 @ 12:00 am In Business Software | No Comments
Can a switch to Windows Vista really create $316 in labor savings per user? That’s what one Microsoft partner claims — although not all small businesses Vista customers would agree.
That kind of claim is hardly unusual. Any business owner or IT exec who’s shopped for software in the last few years has encountered similar vendor statements about the ROI to be had by installing the latest version of some new operating system or application. Some claim their apps “pay for themselves” in a year, or even a few months. But the details on exactly how this repayment happens rarely stand up to much scrutiny.
“When you see a software vendor provide an ROI claim, just ignore it,” advises Victor Cheng, president of Bookmercial Productions  which produces books as marketing tools for client companies. In a previous job at a software company, Cheng used to create those claims himself. “It’s not that they’re deliberately misleading,” he explains. “The problem is these claims are theoretical, and not specific to your situation. The only way to determine the ROI for your company (not some mythical typical company) is to look at what would happen if you used the software you’re considering.”
According to Forrester Vice President Ray Wang, who specializes in software ROI, a new investment in software makes sense if it does one of the following:
Unless the new software helps at least one of these objectives, Wang notes, it’s probably not worth it. “Technology should be an enabler,” he says.
Avoiding small business errors
But even when new software would bring solid business benefits, it’s easy for small companies to make common mistakes when deciding whether or not to make a purchase. To avoid these errors, make sure to ask:
At the same time, Bogorad notes, it’s important to consider opportunity costs that may come with using new software. “If I pay an accountant $1,200 a year to do our taxes, and then I buy a $200 piece of software so that I can do them myself, the jury is out as to whether that’s really the best use of my time and money. You have to take those things into account.”
Ultimately, the best way to judge whether your company would benefit economically from a new piece of software is to ask others who’ve used it. “You can do that by talking to colleagues in trade associations for instance,” Wang says. As well as finding out about the software, make sure to ask if the vendor was easy to work with, and what is required to maintain the software over time, he advises. “Most companies are open about sharing that kind of information.”
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URL to article: http://technology.inc.com/2008/08/01/putting-a-price-on-software-savings/
URLs in this post:
 Bookmercial Productions: http://www.bookmercial.com/
 Bizvortex Consulting Group, Inc.: http://www.bizvortex.com/
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