When an economic downturn starts to hurt, small businesses often hunker down and cut costs. But new technology solutions may be necessary for survival and growth—and they may not be as expensive as you think when you consider their return on investment (ROI). In this three-part series, we’ll review what ROI is, explain how an ROI analysis can help you save or make money, and provide guidelines for analyzing the ROI of a technology investment.
In Part 1 of this series, we examined the basics of ROI—and also noted that ROI is in the eye of the beholder because it has many intangibles. This month, we’ll go into more detail about the different ways a small business can realize a ROI on technology investments—even in an economic downturn, when the conventional wisdom is to cut expenditures.
There are three ways that a technology investment can pay off:
Just how much could you benefit financially from a technology solution? As just one example, Microsoft surveyed 25 small businesses that used Microsoft Windows Small Business Server 2003, a network operating system that provides small businesses with secure Internet connectivity, an intranet, file and printer sharing, backup and restoration capabilities, a collaboration platform, and more.The average cost of the package was $11,650—which included $3,341 in hardware, $2,003 in software, $4,561 in installation, and $1,477 in downtime, plus incremental support. The 25 users surveyed saw a payback of total costs in just 4.9 months. The total average annual benefits were $40,409 and total three-year benefits were $121,227. The software resulted in an average ROI of 947 percent, with some companies realizing a ROI of as much as 2,000 percent.
Getting at those numbers, however, may be the greatest challenge of ROI analysis. Because ROI is not one simple thing, there isn’t one simple way to measure the costs, returns, and benefits of a technology solution. In Part 3 of this series, we’ll look at the many different questions one must ask during a ROI analysis.