Over 10 years we help companies reach their financial and branding goals. Engitech is a values-driven technology agency dedicated.

Gallery

Contacts

411 University St, Seattle, USA

+1 -800-456-478-23

News Technology

The ROI of Investing in Custom Software for Your Business

Did you know that businesses implementing custom software are likely to see a 40% boost in productivity on average? That’s not just a number; it’s a competitive edge. Many businesses are hitting a wall with generic solutions, losing time and money trying to force-fit their processes. In a world of generic software, custom solutions offer the power to truly differentiate your business. But the question is: Does the ROI of custom software truly justify the investment? Is the ROI of custom software worth the hype?

In this blog, we’ll explore the Return on Investment (ROI) of custom software, reveal its true potential, compare it head-to-head with off-the-shelf options, and reveal how to calculate your potential gains.

What is ROI, and Why Does It Matter for Custom Software?

Understanding ROI in Business

ROI, or Return on Investment, is a vital metric for assessing the profitability of any investment. It quantifies the net gain or loss generated relative to the cost of the investment made. Simply put, it tells you how much gain you’re getting for your buck spent. But when we talk about custom software, ROI goes far beyond just dollars and cents.

According to a 2023 McKinsey report, companies that adopt custom software solutions see an average 35% improvement in operational efficiency and a 20% increase in revenue growth over three years. The report also highlights that businesses leveraging custom-made technology are 2.5 times more likely to outperform their competitors in terms of profitability and customer retention.

Think of it this way: you wouldn’t wear a suit that’s two sizes too big, would you? So why force-fit your business processes into generic, off-the-shelf software? Custom software is like a perfectly tailored suit, designed to fit your specific needs and maximise your performance. And that translates directly into ROI.

Why Custom Software ROI Stands Out

Let’s look at a concrete example. Imagine a logistics company struggling with inefficient delivery routes and surging fuel costs. They invest £100,000 in a custom fleet management system. Sounds like a big chunk of change, right? But over three years, that system saved them a whopping £300,000 through optimised routes, reduced fuel consumption, and improved delivery times. That’s a 200% return on their investment!

Now, compare that to off-the-shelf software. Sure, the initial outlay might be lower, but you’re often stuck with rigid functionality, limited scalability, and recurring subscription fees that eat into your profits. It’s like renting a suit instead of owning one – you’re constantly paying for something you don’t truly control, and it might not even fit perfectly.

The key difference with custom software ROI is the focus on long-term, sustainable growth. It’s about building a solution that integrates with your existing systems, adapts to your evolving needs, and empowers your team to work smarter, not harder. It’s not just about saving money; it’s about making money more effectively. And that’s the kind of ROI that truly transforms businesses.

The Key Benefits of Investing in Custom Software

Let us look at an example of DHL, a global leader in logistics. They faced challenges with its supply chain operations due to the limitations of off-the-shelf software. The company required a solution that could handle the complexity of its vast network. They decided to invest in a custom logistics management system. As a result, they were able to automate route optimisation, real-time tracking, and inventory management.

Now let’s explore some key advantages of investing in custom software that can boost your ROI.

1. Improved Efficiency and Productivity

Think of custom software as a bespoke suit tailored to your needs, compared to an off-the-rack option. By automating repetitive tasks, integrating disparate systems, and creating a unified platform, custom software can significantly enhance productivity.

2. Scalability and Flexibility

Off-the-shelf software often requires expensive upgrades or workarounds as your business grows. Custom software is scalable and designed to evolve with your needs, ensuring that your investment remains valuable over time.

3. Enhanced Customer Experiences

Custom software enables businesses to deliver personalised solutions, whether it’s a tailored mobile app, a streamlined service portal, or a customised CRM.

4. Competitive Advantage

Having a custom software solution allows you to differentiate your business from the competition. By developing unique solutions tailored to your specific needs, you can offer services and products that others can’t replicate.

5. Data-Driven Insights

An affordable, user-friendly platform, Zoho Creator is great for small and mid-sized businesses looking for quick app-building solutions.

6. Smooth and Easier Integration

You get to integrate custom-made software easily with your existing systems, eliminating data silos and improving information flow across your organisation. This streamlines workflows reduces redundancies, and enhances collaboration among different departments.

7. Increased Security

While any software can have vulnerabilities, custom software allows you to implement security measures tailored to your specific needs and risk profile. You have greater control over access controls, data encryption, and other security protocols, which can help protect your business from cyber threats.

Comparing Custom Software vs Off-the-Shelf Solutions: A ROI Perspective

When deciding between custom software and off-the-shelf solutions, it’s essential to look beyond the surface. While off-the-shelf software might seem like a quick and affordable fix, custom software often delivers far greater value in the long run. Let’s break it down!

1. Upfront Costs vs Long-Term Value

Off-the-Shelf Software: At first glance, off-the-shelf software appears cheaper. For example, a small business might spend £5,000 annually on a popular CRM platform. However, this cost doesn’t include additional fees for premium features, user licences, or future upgrades. Over five years, the total cost could easily exceed £30,000 – and the software might still lack the specific features your business needs.

Custom Software: Yes, custom software requires a higher upfront investment. Let’s say a business spends £50,000 to develop a custom CRM tailored to its unique processes. While this seems steep initially, the long-term benefits are significant. The software integrates rather easily with existing tools, eliminates unnecessary features, and scales with the business. Over five years, the company saves £20,000 in licensing fees and gains £100,000 in productivity improvements – making the ROI undeniable.

2. Scalability and Adaptability

Off-the-Shelf Software: Off-the-shelf solutions are designed for a broad audience. This means that they often lack the flexibility to grow with your business. For instance, a retail chain using an off-the-shelf point-of-sale (POS) system might hit a wall when expanding to new locations or adding new product lines. Upgrading to a more advanced version could cost tens of thousands of pounds – and still not meet all their needs.

Custom Software: Custom software is built with your business’s future in mind. Whether you’re adding new features, integrating with other systems, or scaling operations, the software evolves with you. This adaptability ensures that your investment remains valuable for years to come.

3. Efficiency and Productivity

Off-the-Shelf Software: Generic software often includes features you don’t need, creating unnecessary complexity. For example, a marketing team using an off-the-shelf project management tool might waste time navigating irrelevant features or manually exporting data to other systems.

Custom Software: Custom software is designed to fit your workflows perfectly. It eliminates inefficiencies by automating repetitive tasks, integrating with existing tools, and providing a user-friendly interface tailored to your team’s needs.

4. Total Cost of Ownership (TCO)

When comparing custom software to off-the-shelf solutions, it’s crucial to consider the Total Cost of Ownership (TCO). This includes:

  • Upfront Costs: Development or licensing fees.
  • Ongoing Costs: Maintenance, upgrades, and support.
  • Hidden Costs: Workarounds, inefficiencies, and lost productivity.

While off-the-shelf software might have a lower upfront cost, its TCO often exceeds that of custom software due to recurring fees and inefficiencies. Custom software, on the other hand, offers a higher upfront investment but delivers greater long-term value through tailored functionality and scalability.

How to Calculate ROI for Custom Software

Calculating the ROI of custom software isn’t just about plugging numbers into a formula. It’s about understanding the full picture – how the software impacts your business financially, operationally, and strategically. Here’s a detailed guide to help you calculate ROI effectively.

1. Total Cost of Ownership (TCO)

The simplest way to calculate ROI is using the formula:

ROI = (Net Gains – Investment Costs) / Investment Costs

Net gains aren’t just about direct revenue. They include both tangible and intangible benefits, such as:

    • Increased Revenue
    • Cost Savings
    • Improved Efficiency
    • Enhanced Customer Retention
    • Reduced Downtime

2. Different Approaches to Calculating ROI

A. Simple ROI (Short-Term View)

This approach focuses on immediate financial gains and costs. It’s useful for quick assessments but doesn’t account for long-term benefits.

B. Comprehensive ROI (Long-Term View)

This approach considers both short-term and long-term benefits, such as scalability, customer satisfaction, and competitive advantage.

C. Intangible ROI

Some benefits, like improved employee morale or brand reputation, are hard to quantify but still contribute to ROI. While they don’t fit neatly into the formula, they should be considered in your overall assessment.

3. Step-by-Step Guide to Calculating ROI

    • Define Your Goals: What do you want to achieve with the software? (e.g., reduce costs, increase sales, improve efficiency).
    • Identify Costs: Include development, implementation, training, and maintenance costs.
    • Quantify Benefits: Estimate the financial impact of increased revenue, cost savings, and other gains.
    • Choose a Timeframe: Decide whether you’re calculating ROI for 1 year, 3 years, or longer.
    • Apply the Formula: Use the ROI formula to calculate your return.
    • Analyse Results: Compare the ROI to your business goals and industry benchmarks.

Tools like QuickBooks or Xero can help you to track costs and savings. The easiest way to maximise your ROI is to work with a software development partner to estimate costs and benefits accurately. Confused how to choose one? Dig in and find out about the process of technology vendor selection with our latest blog.

Is Custom Software Worth It? (Spoiler: It Can Be a Game-Changer)

Let’s be honest: “Investing in custom software” doesn’t exactly scream “exciting.” But what if it’s the secret weapon your business needs to not just survive, but dominate? Think about it: Are you truly maximising your efficiency with off-the-shelf solutions that are “close enough”?

Investing in custom software isn’t just about upgrading your tech. But it’s about strategically positioning your business for success. It’s about building a digital foundation that’s as unique and powerful as your vision.

Ready to ditch the generic solutions and bring out the true potential of your business? At Emvigo, we’re not just building software; we’re building partnerships. We’re passionate about helping businesses like yours maximise ROI and achieve real results that reflect ROI.

Contact us today for a free consultation and let’s explore how custom software can transform your business. Let’s build something amazing together.

Author

Super Admin

Connect with the team for better communication?

Let’s Talk >
 

 

• • •
 

    Need the power of technology to boost your business?



    This will close in 0 seconds

      Take a step closer to your dream career!


      This will close in 0 seconds

        Need the power of technology to boost your business?



        This will close in 0 seconds

        Enrollment is closed now.

        This will close in 0 seconds

          Need the power of technology to boost your business?



          This will close in 0 seconds

            Download the full case study for detailed insights.



            This will close in 0 seconds

              Download the full case study for detailed insights



              This will close in 0 seconds

                Download the full case study for detailed insights



                This will close in 0 seconds

                  Download the full case study for detailed insights



                  This will close in 0 seconds

                    Download the full case study for detailed insights



                    This will close in 0 seconds

                      Download the full case study for detailed insights



                      This will close in 0 seconds

                        Download the full case study for detailed insights



                        This will close in 0 seconds