What’s the ROI on Your Tech Stack
If you are responsible for buying enterprise software or IT equipment or supporting an organization that wants to know why they should be paying attention to technology, you might have already heard something along the lines of Return on Investment (ROI) when it comes to such purchases. You may have even seen some ROI calculations in documents such as business cases.
Why Tech Stack ROI is Important for Digital Transformation
Understanding the ROI of your tech stack can help you identify which tech investments are delivering business value and which ones are sucking money out of your innovation budgets. Knowing exactly where you are hemorrhaging the budget on solutions that have low user adoption or cause cross-functional problems can reveal opportunities to free up cash for solutions that actually drive digital transformation.
We are excited about the opportunity to level up, rip and replace our tech stack and ensure that what we’re ripping and replacing it with is the best option for PRMI.
Corban Wells, Director of Product Management at Primary Residential Mortgage, (PRMI)
Why You Should Care about the ROI of Your Tech Stack
Return on Investment or ROI is one of the most clichéd and paradoxical evaluation metrics used in any technology purchase decision. Paradoxical as it is frequently impossible to gauge the eventual potential improvements from capital investments. However, it doesn’t stop anyone from trying, and it and does help to guide tech stack decisions.
As flawed as it is, without it, you are buying in the dark.
Digital transformation is about finding best-fit technology that will meet the needs of your business in collaboration with key stakeholders. Unfortunately, the process of finding these solutions has become so muddled with exorbitant costs, exhausting timelines, and conspicuous agendas. The recent pandemic has sped up digital transformation. With recession rumors swirling and inflation at an all-time high, IT leaders realize that getting through this crisis requires innovation.
However, in many cases, CIOs and tech departments would rather trundle along with outdated systems rather than engage in the process of finding the right solutions.
Developments within the software industry are automating processes and saving companies millions. Ironically, the technology buying process hasn’t caught up until now. Many organizations still buy technology based on the leading brands or the best reviews, not based on how well they meet the needs of the organization.
Improve the ROI on Your Tech Stack by Finding Best-Fit Solutions That Drive Digital Transformation
Olive acknowledges the trepidation of buyers and the variety of risks associated. We fully appreciate that many CIOs, digital transformation consultants, and leaders put their reputations on the line when sourcing solutions for their tech stack. Beyond the personal, there are numerous business risks, financially, operationally, and efficiency-wise.
The extenuating process regrettably leads to cut corners and frustrations. However, each step is vital and should be carefully presided over.
Take the time to decide on your needs and survey key stakeholders for their opinions. Once the requirements are listed, set parameters and filters for budgets and capabilities. Now you are equipped to draw up a list of potential vendors before shortlisting your favorites and sending out RFPs. Demo the options you receive with others from your business and evaluate them based on your needs. With the thorough process, you are ready to decide and move to the contracts and implementation stages.
Believe it or not, we have clients who recall a nightmarish 2+ year process in evaluating technology and somehow, still being left unsatisfied. How much did that cost?
Streamline Solution Evaluations to Improve the ROI on Your Tech Stack
The human resources involved in a lengthy inefficient process considerably reduce the potential ROI.
The costs associated with fixing, onboarding, and implementing are extravagant before even addressing the recurring impacts of incorrect decisions. The headaches are simply inappropriate for today’s world, and we have encountered clients who are understandably ‘done’ with the absonant process. We get it! Olive is here to ensure you find solutions that are not influenced by bias or evaluation fatigue. We want to help you streamline your process and accelerate digital transformation, and ultimately, increase the ROI on your tech stack. Here are a few ways doing so can improve the ROI on your tech Stack;
1) Sales Boost: Reduced costs bring down prices, and an effective tech stack vastly improve customer satisfaction and experience through ease of purchase and functionality.
3) Team Perks: Productivity increases due to the automation of minor tasks. Similarly, morale and innovation are increased due to reduced frustrations with inefficient technology.
4) Forecasting: Frequently overlooked are the benefits of accurate tech stack data analytics. Control data reports highlight inefficiencies, customer preferences, and market trends putting you in a position to make informed decisions for the future.
How to Calculate the ROI of Technology Investments
The most straightforward method of calculating test automation ROI is the following formula:
ROI = Gain – Investment ÷ Investment
- Gain: The amount gained by replacing manual processes with automated processes. For example, for consultants calculating automating their consultancy with Olive’s technology, they can include gain factors such as saved hours gathering requirements and ranking requirements, less admin tasks, improved requirements traceability, and less wasting with long-winded RFP documents.
- Investment: The costs funneled into setting up test automation pipelines.
ROI can denote any unit for savings or investment – typically equating to money or time.
Savings refers to the difference between the costs of running tests manually instead of running those same tests automatically a certain number of times over a certain period. Simply put:
Savings = (time to run a single manual test – time to run the same test in automation) X number of tests X number of test runs)
How to Calculate the TCO (Total Cost of Ownership) on your Tech Stack
According to CIO.com, TCO is a vital part of the ROI calculation for enterprise software. The Total Cost of Ownership (TCO) for enterprise software is the sum of all direct and indirect costs incurred by that software and is a critical part of the ROI calculation. Unfortunately, TCO is often ignored or underestimated.
When calculating ROI, include TCO costs that can be incurred by your solutions;
Costs per license, number of licenses that will be needed in the future with expected growth. Off-the-shelf software usually has an up-front software cost plus user licenses. Remember to include any finance charges.
Costs like servers and storage to run the software and other expenses like backup and disaster recovery. (This does not apply to cloud software)
Any costs associated with the implementation. Setting up, configuring, and testing software so it can be used in production. Cost of training initiatives and employee support. With custom software, the configuration is usually part of development.
The cost of moving data from the old to the new system, including data format changes. Often this is not economically viable, so the old system is archived in a read-only mode.
Olive Helps You Identify Technology That Will Transform Your Business and Your Bottom Line
Developing your tech stack can be an intimidating process full of potential pitfalls and risks. The time required is a financial risk of its own and off-putting too many departments, However, when your company chooses the right solutions in collaboration with the entire organization, in less time, the results can dramatically increase the ROI on your tech stack.
We have heard it all from vendors over-promising to market comparison evaluators only suggesting vendors based on commission when a more fitting solution is available. Conducting the need analysis, surveying the market, and getting realistic, credible options to evaluate technology is challenging, but the process is necessary to find the solutions that will transform your business and your bottom line.
Olive’s vendors are not paying to be featured on our list of solutions, and you remain an anonymous buyer. This would be a conflict of interest for our brand and would undermine our credibility. Instead, Olive takes your needs – and invites the market to respond to those needs. You, the buyer, remain anonymous, and vendors can bid on your opportunity while you create it. Olive only recommends best match vendors, and you will see clearly, who is a match and why.
Our process aims to circumvent any potential overreaching sales and identify the right solutions without wasting your time. If they are not a good fit for you, you don’t spend time, money, or resources to find out after implementation, they don’t fit your business needs. It is as simple as it should be.
Your long-term success should be the primary driver in your digital transformation strategy, and we aim to ensure you reach that goal. Each client has unique needs, and with Olive, you are getting a partner that goes to bat for you based on what is suitable for your company!