20th July 2024

Ensuring ROI in Software Projects: A Decision-Maker’s Guide

Investing in a new software project – whether it’s a custom application, a major system upgrade, or implementing an off-the-shelf platform – is a significant decision for any business. For small and medium-sized enterprises (SMEs) and public sector organisations alike, budgets are tight and the expectations are high. Stakeholders want to know: will this investment pay off? Ensuring a solid Return on Investment (ROI) in software projects is both an art and a science. It requires upfront planning, continuous oversight, and alignment between technical outcomes and business goals. As a decision-maker, you don’t need to write code, but you do need to steer the project toward value. This guide outlines practical steps and considerations to maximize ROI on your next software initiative, from conception through to post-launch.

Start with Clear Business Objectives

Every successful project starts by answering a simple question: Why are we doing this? It’s surprising how often projects kick off with a focus on features or technology (“we need a new CRM system” or “let’s use blockchain for this”) without clearly tying it to a business objective. As a decision-maker, insist on clarity here. Are you aiming to increase revenue? Reduce costs? Improve customer satisfaction? Perhaps ensure compliance or speed up a certain process? Quantify the goal if possible, for example, “reduce invoice processing time by 50% within one year” or “increase online sales by 20% next holiday season.” These objectives will become your north star for ROI.

Having specific goals helps in two ways: First, it keeps the project scope focused on what truly matters (preventing feature creep that doesn’t serve the goal). Second, it provides a basis for measuring success and ROI after implementation. Tie each major feature or component of the project to how it supports the objective. If something doesn’t clearly map to a business driver, question why it’s included. It might be a “nice to have” that could be trimmed to save time and money.

It’s also valuable to document the current baseline. If you aim to increase sales 20%, note the current sales figures. If improving customer satisfaction, record your current CSAT or NPS scores. These baselines will be used later to calculate the project’s impact. Additionally, consider the cost of doing nothing. For instance, if you don’t invest in the new system, will you incur increasing maintenance costs on an old system, or lose customers to competitors? That “do nothing” cost can be seen as part of ROI justification as well.

Use Agile and Iterative Development for Early Wins

One of the best ways to ensure ROI is to start delivering value early. Embracing an Agile development approach allows for iterative releases of software rather than a big bang at the end. By breaking the project into smaller phases or sprints, you can roll out core features sooner and start realizing benefits (or learning from failures) earlier. This not only reduces risk but also can generate incremental ROI during the project.

For example, suppose you’re developing a customer portal to reduce support calls by letting customers self-serve. Instead of delivering the full portal in 12 months, deliver a basic FAQ search and ticket logging feature in 3 months. This may immediately start deflecting some calls, saving support costs (ROI!), while the team works on adding account management features next. Early wins build confidence and can sometimes even provide financial relief that helps fund later phases of the project.

An Agile approach also means you can adjust course if something isn’t delivering expected value. Let’s say by Sprint 4 you deliver a feature and find users aren’t adopting it as anticipated. It’s better to find out mid-project and pivot than post-launch when all budget is spent. Regular demos and stakeholder reviews in Agile keep the focus on value delivery. Decision-makers should attend these reviews whenever possible to ensure the project stays aligned with business goals and to make prioritization decisions (e.g., “Feature X isn’t as useful as we thought; let’s focus on Feature Y which shows more promise”).

Additionally, building in feedback loops (through user testing or pilot releases) will ensure the end product actually meets user needs, which is critical for ROI. Software that isn’t used or appreciated can never provide a return, no matter how on-budget it was.

Manage Scope Creep and Prioritize Ruthlessly

Scope creep – the gradual expansion of project scope beyond original plans – is a notorious ROI killer. New ideas and requirements will emerge during any project (that’s natural and not inherently bad), but how you manage them determines success. As a decision-maker, cultivate a practice of ruthless prioritization. Use a framework like MoSCoW (Must have, Should have, Could have, Won’t have) or simple ROI impact vs effort matrices to evaluate new requirements.

Always ask: does this new feature significantly contribute to our core objectives? If not, consider parking it for a future phase. It might be painful to say no to certain stakeholder requests, but finishing a smaller, high-impact project is far better than half-finishing a sprawling one that tries to please everyone. Remember, additional features always mean additional costs (development, testing, possibly more infrastructure) which will eat into ROI unless they add commensurate value.

One effective strategy is to define a Minimum Viable Product (MVP) for the project. What’s the simplest version of the solution that would still achieve the primary objective? Aim to deliver that first. Anything beyond MVP is a candidate for secondary priority. If time and budget permit, you can include more, but not at the expense of the MVP. This mindset protects the core value delivery.

It’s also crucial to maintain a change control process. This doesn’t mean you can’t change requirements, but changes should be assessed for impact on timeline and budget. If a new feature is added, maybe another is removed or deferred to keep the scope balanced. Continuously communicate with stakeholders about the implications of adding to scope – sometimes people assume adding one little thing is “easy” when it might not be. Transparency here can help manage expectations and keep everyone focused on the ultimate ROI, not just on getting every possible feature.

Keep an Eye on Total Costs (TCO)

When calculating ROI, it’s easy to focus only on development costs and immediate returns. But true ROI should consider the total cost of ownership (TCO) of the software over its useful life. TCO includes development (or purchase) costs, plus ongoing maintenance, support, licensing fees, hosting infrastructure, and even training and change management for users. As a decision-maker, you’ll want estimates (or caps) on these ongoing costs to understand the investment fully.

For example, you might build a custom solution that perfectly fits your needs – great! But if it requires a team of 3 to maintain and servers that cost £5k a month to run, those costs need to be offset by the benefits the software provides. On the other hand, an off-the-shelf solution might have an annual subscription fee, but perhaps reduces the need for internal IT support. Compare these scenarios not just on initial price tag but on 5-year cost outlook.

Also factor in opportunity costs: what are you not doing because you’re doing this project? Ensure that the chosen project has a higher expected ROI than other ways you could spend that money or effort. Tools like Net Present Value (NPV) or Internal Rate of Return (IRR) can be applied to project investments if you want to get financial about it, but even a simpler payback period analysis (how many months/years until savings or increased profits pay back the cost) can inform decisions.

Measure, Measure, Measure

You set clear objectives at the start – now make sure you measure them. Define Key Performance Indicators (KPIs) related to your goals and set up a way to track them before and after the software implementation. If the goal was to reduce invoice processing time by 50%, measure how long it takes now versus after launch. If it was to increase sales, track the sales metrics attributable to the new software (maybe conversion rate on your website, or number of leads handled per month by the new CRM process).

It’s important to differentiate between vanity metrics and real value metrics. For instance, “number of new features delivered” is not a value metric – it’s activity. Instead, look at outcomes: revenue, cost, time saved, error rate reduction, customer satisfaction, etc. In the public sector, ROI might be measured in citizen satisfaction or efficiency (like more applications processed with the same staff).

Set up dashboards or reports to monitor these KPIs. Many modern software systems have built-in analytics; if not, consider adding logging or using third-party tools. By measuring continuously, you can ensure the project is delivering and also catch any shortfalls early. If ROI isn’t materializing as expected, you can investigate why – perhaps adoption is low (maybe more training or internal marketing is needed), or maybe an assumed benefit didn’t pan out (time to adjust the software or processes around it).

Also, communicate these results. Let your team and stakeholders know when improvements occur. Over a third (35%) of SME leaders say their most crucial technology goal is to improve efficiency and productivity​ – showing concrete data on efficiency gains reinforces the value of the project and maintains support. It also helps when pitching the next project: you’ll have a proven track record of ROI.

Plan for User Adoption and Training

No matter how brilliant a software solution is, its ROI will fall flat if people don’t use it effectively. User adoption is often overlooked in project planning. Make sure you allocate time and resources for change management, training, and support. This is particularly true in the public sector or larger SMEs where processes may be deeply entrenched and users might be resistant to change.

Consider involving end-users early (during testing or feedback sessions) so they feel a sense of ownership and familiarity by launch. For training, go beyond a one-time workshop; provide quick reference guides, in-app help if possible, and have a support channel (like a designated “super user” in each department or a helpdesk line). Sometimes, the ROI of a system is realized only when old processes are fully retired – if employees cling to old ways (e.g., keeping manual spreadsheets because they don’t trust the new system yet), you don’t get the efficiency gains. So, executive sponsorship and clear communication that “this is the new way and here’s why it’s better” is key.

Monitor adoption metrics too: login frequency, number of transactions in the new system vs old, etc., if applicable. If you see some departments lagging, you can intervene with additional help. High adoption = more ROI.

Post-Launch Optimization

ROI optimization doesn’t end at launch. In fact, post-launch is where the rubber meets the road. After the software is live and people are using it, you might discover new opportunities to tweak and improve. Maybe certain features aren’t used at all (could they be removed to simplify workflows?), or maybe there’s a bottleneck in the new process that needs attention.

Plan for a post-launch review at set intervals (30 days, 90 days, 6 months). Gather feedback from users and look at those performance metrics. Are we hitting the targets? If not, why? Sometimes minor adjustments can significantly improve outcomes – like adjusting a user interface to reduce confusion and hence reduce support calls even more.

This iterative improvement ensures you squeeze maximum value from the project. It’s also part of the ROI mindset: treat the project as an investment that you manage actively, not a one-and-done expense. If an area isn’t yielding as much benefit as hoped, invest a bit more effort to fix it. If an area is overachieving, see if you can double down on it.

Conclusion

Ensuring a strong ROI in software projects is about making smart decisions throughout the project lifecycle. It starts with aligning the project to clear business goals and continues through disciplined execution – agile delivery, strict scope management, careful cost control, and diligent measurement of results. For decision-makers, the takeaway is that you have to be both visionary and pragmatic: set inspiring targets for what the project should achieve, but also keep a tight handle on the practical steps to get there on budget and on value.

In an era where every pound of IT spend is scrutinized, adopting this ROI-focused approach will not only make your projects more successful but also build credibility for future investments. Both SMEs and public sector bodies face pressures to justify expenditures. By following the guide above, you can turn your software project from a cost center into a demonstrable value creator for your organisation.

At Gemstone IT, we’ve helped numerous clients plan and execute projects with ROI in mind – from initial consulting to development and post-launch support. We understand that technology is only as good as the results it delivers. If you’re planning a software project and want to maximize its impact, we’re happy to share our expertise or even manage the project for success. Your software investments should propel your business forward – let’s ensure they do exactly that.