How To Measure The ROI For New Technology Investments

As a wealth manager or family officer, you may not view technology as your core competency. Evaluating how successful an investment into a new digital solution may therefore seem daunting. There is, however, a well-respected process for doing so that you can be confident adopting: 

01 Define the Problem

Before making a decision to invest in a new technology, put some time into developing a plan. In particular, seek to understand your biggest problems to solve. The more clearly you define these challenges, the easier it will be to choose a technology to overcome them. Remember that one tool will be unlikely to solve all your problems; therefore you should prioritise your worst pain points and determine which solution’s features and functions are the best fit. 

02 Create a Plan with a Timeframe

To create a good technology roadmap, you first need to understand not only your current situation but also your future goals. External consultants with fresh perspectives can help you see the big picture here, including factors someone inside your business might be likely to miss.  

Next, set a realistic timeframe adjusted to your unique circumstances. In IT hardware projects, a three-year time frame is commonly used when calculating ROI. After three years, the hardware is often considered outdated. Investments in software, on the other hand, typically involve lower upfront costs that can be spread out over months or years. Pick an implementation timeframe and purchasing structure that is relevant to the investment you are evaluating.

03 Be Realistic

Your roadmap should reflect your firm’s priorities. Prioritisation should be given to solving problems that are the biggest barriers to achieving your business goals. Do not simply look for the cheapest or easiest solutions. 

A realistic plan should factor in your available resources and any system interdependencies. Also, your plan should be flexible and allow for possible changes. Set a strategic direction with priorities, but understand that they may change over time as more information becomes available.

04 Be Consistent

Your ROI calculation methodology should be consistently applied across all comparable projects or investments. Consistency is also key to the assumptions behind your ROI calculations. For example, the treatment of inflation and taxation should be the same in all calculations. 

Accuracy is necessary, but do not overdo it. For instance, in large-scale projects, rounding to even numbers is a good idea as small differences in results may imply accuracy that does not in fact exist. At the same time, avoid adjusting the results of your calculations too much lest they be considered unrealistic. 

05 Define Your Goal and Success 

Before embarking on a major technology investment, you should not only define your goal but also how your success in achieving this goal will be measured. Doing so may require you to dig deep into aspects of your finances that are otherwise rarely considered. For example, the total cost of ownership – including maintenance costs – of an existing solution may be an important benchmark when calculating the ROI of potential upgrades.Set realistic, quantifiable goals for your project and hold yourself and your people accountable for reaching them.

In short, proper ROI analysis is about more than simply looking at costs. It also involves understanding how the choice to change or purchase technological solutions will impact your business, employees, customers, and end users. With all these factors under consideration, you can confidently make strategic, well-informed decisions to drive a positive ROI.