tl;dr Scroll down to the section, “3 questions for profitable software purchases”
It’s a very rare occurrence that someone says to us, “I saw this really cool software and I’d like to spend thousands of dollars on it to show off to my friends.”
Most people start with a need and then buy software for that need. A person needs to create custom PDFs, so they buy a PDF Creator like Adobe Writer. A manager needs reports to track how often the sales team converts a lead, so a CRM like Salesforce is purchased.
Put another way, most people don’t spend a Saturday “window” shopping Crozdesk for fun (that joke slays at the IT Comedy Club).
But, if people buy software to meet a need, why is it so many businesses fail to see a return on investment from their software purchases?
The answer is simple: Most people buy to fulfill their need, not the needs of the business, regardless of the type of software or expense. This isn’t necessarily borne of some undesirable trait. We’re obsessed with productivity. Sometimes, in our desire to increase our productivity, we forget that the only productivity that matters to the business, is the productivity that increases profits.
How, then, do we protect ourselves from our zeal and make productivity about business profits once again? You should ask yourself three questions.
3 questions for profitable software purchases
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In what way does this software increase business profits?
Ask yourself if it effects labour, capital, or materials. Labour: Does it free a team member to do another, more profitable activity? Capital: Does it reduce the cost to complete an activity? Materials: Does it replace a good or product (e.g. paperless systems).
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Does this software require additional training or a change in workflow?
Training can be costly and time-consuming. A software that can handle the needs of a complex business will generally be more complex than the typical, out-of-box solution. A protracted learning curve can delay the return on investment or, worse, prevent a busy business from ever making use of the software.
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Who will be responsible for developing or maintaining the software?
As the person responsible for authorizing large purchases, it is fairly common in small businesses that the financial officer becomes responsible for software. In other cases, it is the department head. In either event, this is often not ideal. Managers rarely have time to dedicate to learn a new software, conduct workshops, or sit on the phone for long periods of time to work through the technical details of API integration – the things necessary to earn a strong return on investment.
The questions above will start you in the direction necessary to make profitable software purchases. Identifying the ultimate end goal – profits – will eliminate the majority of wasteful software purchases. Understanding the associated costs of training or the change in workflow will help you decide the best time to implement a new software. Choosing the right person or team to be responsible for the development of the software will give the software purchase a long tail, increasing the return on investment many times over.
As a business technology productivity firm, our clients expect us to not only understand why things fail and how they succeed, but to take action to ensure they succeed. If the post above has left you with questions for your business, we hope you will reach out to us. We’ve turned our clients’ purchases into investments, from losses to profits. We can do the same for you.
