Strategies for higher software ROI
In the recent unpredictable economic landscape, direct selling companies are constantly seeking ways to refine operations and reduce costs. One area that often presents significant opportunities for cost savings is direct selling software.
By carefully evaluating and improving software investments, companies can streamline processes, enhance efficiency and weather economic downturns more effectively. Let’s explore strategies for cutting costs in direct selling, with a particular emphasis on software.
Assessing Software Needs and Costs
A comprehensive assessment of your software needs is the foundation for effective cost-cutting. This involves identifying essential applications and evaluating their cost-effectiveness. Here are some key considerations.
1 / Identify Essential Applications
Determine the software tools that are critical to your operations, such as:
- Reporting
- Business intelligence and data visualization
- Product inventory control
- Customer Relationship Management (CRM)
- Shopping and order processing
- Shipping and logistics
2 / Evaluate Cost-effectiveness
Consider the following factors when assessing the cost-effectiveness of each application.
- Maintenance costs
Factor in the costs of software updates, upgrades and technical support. - Return on investment (ROI)
Evaluate the benefits of each application and how it contributes to your overall business goals. - Scalability
Assess whether the software can accommodate your company’s growth and changing needs. - Integration
Consider the ease of integrating the software with your existing systems. - User friendliness
Evaluate the software’s ease of use and whether it meets the needs of your employees. - Customization
Assess the flexibility of the software to be tailored to your specific business processes.
3 / Metrics to Keep in Mind
When assessing software costs, it’s essential to focus on key metrics that offer a comprehensive view of your investment’s value. Here are four critical formulas to guide your evaluation.
- Return on Investment (ROI)
ROI measures the overall financial return from your software investment. This shows how much you gain for each dollar spent, helping you assess the financial efficiency of the software. The formula is: ROI = (Net Benefits – Costs) / Costs. - Total Cost of Ownership (TCO)
TCO accounts for the entire cost of the software over its lifecycle, not just the purchase price. This includes upfront costs (such as licenses and installation) and ongoing expenses (maintenance, upgrades and training). TCO offers a holistic view of what you’re truly spending. - Payback Period
This metric helps you understand how quickly the software will pay for itself. A shorter payback period is ideal, as it shows a faster return on your investment. The formula is: Payback Period = Initial Investment / Annual Savings or Benefits. - Time to Value (TTV)
TTV measures how long it takes for the software to deliver measurable benefits after implementation. A shorter TTV means your business will start reaping the benefits sooner, which is crucial for keeping operational momentum and improving overall ROI.
4 / Improving Existing Software
Before investing in new software, explore opportunities to improve existing systems. Often there are underdeveloped and underutilized features within existing software that can be used to streamline processes and reduce costs. Consider:
- Customization
Adapt your software to your specific business needs, cutting unnecessary features and tailoring it to your workflows. A custom development partner can often help with this if the in-house staff doesn’t have the bandwidth. - Integration
Integrate your software systems to improve data flow and reduce manual data entry. If you use third party apps, there are partners who can help with seamless integration.
5 / Evaluating Legacy Systems
Legacy systems, while familiar and reliable, can often be costly to support. Assess the ongoing costs associated with your legacy systems, including headcount, hardware, software maintenance and support. Ask yourself these questions when evaluating whether to upgrade or replace legacy systems.
- Scalability
Can your legacy systems accommodate your company’s growth and changing needs? Can they keep up with modern innovations in technology and the direct selling industry? - Security
Are your legacy systems adequately protected against cyber threats? Does your in-house team guarantee uptime and security? - Efficiency
Are your legacy systems hindering productivity and efficiency due to lack of speed or complex usability?
6 / Cloud-Based Solutions
Cloud-based software offers several advantages for direct selling companies looking to reduce costs and improve flexibility. There are key benefits of moving to the cloud.
- Reduce upfront costs
End the need for expensive hardware and infrastructure, such as servers, storage devices, staff and networking equipment. - Improve scalability
Easily adjust your software resources to meet changing demands. As your business grows (or shrinks), you can quickly scale up or down, avoiding the need for costly hardware upgrades, hiring or downsizing. - Reduce maintenance costs
Rely on your provider for software updates, maintenance and security patches. This frees up your IT resources to focus on other revenue-focused and strategic initiatives. - Improve data security
Platform as a Service (PaaS) providers often have robust security measures in place, including data encryption, access controls and disaster recovery plans. - Integrate with other cloud-based tools
PaaS software often integrates seamlessly with other cloud-based tools, such as CRM, marketing automation and accounting software.
7/ Software Licensing and Negotiation
Negotiate your software licensing agreements to secure favorable terms and potentially reduce costs. Consider the following strategies:
- Volume discounts
Negotiate discounts for multiple licenses or long- term commitments. - Implementation
Request a discount for the initial launch implementation fees. - Customization
Request customization options at a reduced cost.
The key to successful software management is a proactive approach involving regular assessment, optimization and negotiation. By staying informed about the latest trends and technologies—and by making informed decisions—you can ensure that your company’s software infrastructure supports your growth and profitability.
Since 2002, RODGER SMITH has brought his entrepreneurial mindset and no-nonsense, sincere leadership style to the direct and social selling industry. Rodger successfully completed the merger of his first technology company with a competitor in 2010. He then co-founded the company that would become DirectScale in 2012, and by 2017 completed two successful rounds of funding. In 2022, DirectScale was sold to Exigo where Rodger currently serves as President and CMO.
