In 2019, experts discovered that companies are spending around $4 trillion on technology each year.

That number continues to rise as the world becomes more digital, with increased numbers of online sales, higher percentages of remote workers, and more.

Business leaders today are spending their tech budget on everything from tools to improve collaboration and productivity in the digital age, to apps to enhance customer experience.

The question is, how do you determine exactly how much return on investment these purchases are delivering?

Today, we’re going to look at the basics of calculating ROI from tech investments.

This way, you should be able to justify every major update and tech enhancement your company considers.

The Basics of Calculating ROI

Some aspects of calculating technology ROI are easier to understand than others.

For instance, if you leave a legacy communications system behind and replace it with a cloud solution, you see almost immediate savings in not having to pay for on-premises maintenance and tools.

However, you can’t always see tech ROI in the form of a dollar value.

Getting a positive return on investment from your technology means making sure that the results of the technology are equal to or greater than the cost of buying it.

For instance, if you pay $50 per month for a collaboration and video conferencing tool, you want to know that you’re getting more than $50 in value back.

Things get complicated when the ROI isn’t immediately visible in monetary terms.

Having a collaboration system in place might not make you money directly, but it saves you costs on things like productivity, efficiency, team bonding, and alignment.

When calculating technology ROI, companies need to consider not just the money they’re saving from a new investment but the non-tangible benefits too.

Measuring ROI for Tech Investments

A simple formula for measuring tech ROI would be ROI = net gain divided by cost.

For instance, if you spend $100 on something and you https://fowmedia.com/the-7-top-challenges-of-byod-policies/make $150, then your net gain would be 50, or 50% – which is very positive.

Since buying a computer won’t necessarily make you money directly, you need to look at the value of what your service really achieves.

Let’s take a look at some things you can ask yourself to determine this value.

How Much Money Are You Saving With Productivity and Efficiency Features?

You can calculate a dollar value from this by looking at the number of hours your employees save when using your new technology.

An employee saving an hour a day at $15 per hour of wages would save you around $75 a week in a five-day week.

How Does Tech Affect Your Number of Customers?

New technologies can help you serve your customers better.

If implementing BYOD policies allows your customers to serve up to 10 more customers per day, you can calculate the value of that technology as the same as the value of ten customers.

To get a dollar ROI, simply multiply the average daily value of a customer by 10.

How Much Are New Opportunities Worth?

Sometimes, new technology like live chat features or website pages in different languages can help you unlock new market opportunities.

You can track the overall value of these investments by measuring how many customers come to you through those new channels and calculating the lifetime value of each customer.

Consider All the Intangibles

New technology can bring substantial returns in other intangible ways.

For instance, if your employees save around 50 hours a week in productivity because of your new productivity system, you’re not just saving on the costs of employment, but on the costs of running an office building too.

You can also think about the potential value added by the 50 hours that your employees can dedicate to other opportunities.

Some technology can also improve both customer and employee satisfaction.

Improved customer satisfaction leads to a higher lifetime value for each client and a greater overall value from each customer.

Better employee satisfaction means you save money on staff turnover, training new teams, and recruiting staff.

Measure the Results That Matter to You

Often, the key to getting a better view of your tech’s ROI, is investing in tools with a specific goal of what you want to achieve.

For instance, designing an app for your business can benefit your company in a variety of ways, including increased sales, new marketing opportunities, and better brand reach.

You can choose to make it for either of those results.

It’s much easier to calculate your ROI if you know what you’re trying to achieve from day one.

For instance, if the goal in implementing a new app for your business is to increase the number of customers your agents can serve, you can track your results by seeing how many more sales you’re processing with the app in place, compared to your previous numbers.

You can immediately see how much you’ve improved the number of sales happening each day,

When you know what you’re looking for to determine whether your investment was a success or not, it’s easier to convert intangible concepts like customer satisfaction or employee productivity into dollar amounts.

For instance, if you know your average sale is around $15 per day, and you process around 50 extra sales per day with the app, your return on investment is $750.

Calculating Tech ROI

Calculating return on investment isn’t always easy, particularly when dealing with intangible benefits and results.

Fortunately, the tips above should put you in an excellent position to start measuring what your tech tools really do for your company.