For any growing and changing business the purchase of capital goods is standard. Equipment is fairly easy to assess the return on investment, however, a non-tangible product such as software can be more challenging. As with any ROI model three dimensions should be incorporated at minimum. First, the net tangible benefits or the net financial savings or gains that can be easily quantified. Second, the net intangible benefits, the net savings or benefits from the solution that are significant to business goals, strategy or operations. Finally, the risk of implementing the solution such as the management of cost and the fallout of not implementing the software solution.

Because the tangible benefits are easier to quantify through the capitol expenses, labor costs, labor savings, ongoing support of retailer and time savings, I will focus more heavily on the intangible benefits and how to assess them in a software purchase.

One of the greatest intangible benefits gained is the intellectual capitol of your staff who will be using the software product, however, there is a learning curve for all software and this must be examined. How long will it take to become proficient in the software and by that time will it be obsolete? Another aspect to look at is the competitive advantage you may achieve over your competition by better meeting the demands of a changing market. Analyze the software brand name as well. Does the brand offer any advantages that you trust and will they support you for months or years to come?

Finally, you have to analyze the overall risk of not implementing the software solution. Risk can be measured on the probability of occurrence, and the likely impact on the costs and benefits. In some instances discounting the value of the project significantly. When analyzing risk, look at several factors such as labor resources available for implementation and training, and ongoing internal support. User acceptance within the organization is critical because if the users don’t accept the solution, only use a small feature set, or reject it altogether then the benefits are substantially reduced. Make sure to review how compatible the software will be with your operating system, hardware platform and other software. Finally make sure your vendor is able to deliver the solution in the promised time frame and to the required specifications. Check to see how long the vendor has been in business and check a minimum of three references making sure to ask them all the same questions

This ROI model may difficult at times to follow. However, by making use of it you should be able to assess the intangible to some degree.

(Editor’s Note: Reprinted with permission from “Bits & Bites, the Mailmedia Inc. Data Team Newsletter. Mailmedia may be reached at (800) 442-7814 or www.mailmedia.com)