What’s the ROI of reporting software?
Sales of reporting software are rising rapidly. Why? Because in today’s competitive business world, companies are realising that the basic reports that are built into their ERP systems aren’t giving them the information that they need. Something else is needed—and that something is reporting software.
The logic isn’t difficult to see. The data that companies want to analyse and report on is there in abundance, in their ERP systems’ databases. What’s needed is some way of easily extracting it, and then presenting it in a readily understood format. Which is precisely the job that reporting software undertakes.
The challenge is understanding the ROI of doing that. Reporting software might generate reports, goes the argument, but what exactly is the business justification for having those reports?
And it’s a very fair question to ask. Because most businesses have more potential investments than they have the capital available to fund those investments. Should they buy a new machine tool—or some reporting software? A warehouse extension—or reporting software? And so on, and so on.
Reporting software: one version of the truth
How best to approach the problem? One way to assess the ROI of reporting software is to look at the direct costs incurred through not having reporting software.
Which are easy enough to get a handle on. People spending significant amounts of time building and maintaining spreadsheets, for instance. People wasting time in meetings debating whose spreadsheet is correct. And senior finance and accounting people spending time on basic data extraction and analysis tasks—simply because they happen to be spreadsheet ‘power users’.
And speaking of wasting the time of highly-qualified and highly-paid people, it’s often the case, too, that IT people get drawn into creating and maintaining special-purpose reports and queries that are to be run directly against the ERP system’s database, perhaps in SQL.
Add it all up, and the allure of off-the-shelf reporting software starts to become understandable.
Reporting software: missed opportunities.
There’s another, less tangible cost incurred through not having reporting software in place. And that’s the cost of opportunities missed, improvements not made, and foregone revenues and profit margin enhancements.
These can admittedly be hard to quantify. How do you know the value of a missed opportunity, when you don’t even know what that opportunity is?
Borrowing a trick from the ‘zero-based budgeting’ school of thought helps to provide an answer.
For instance, challenge your senior sales and marketing people to raise their revenue or profit margin targets by an appreciable amount—say 10%. They’ll kick up. But then ask them what it would take to achieve that.
Often, the answer comes not in the form of more sales people, but better information about sales prospects, better information about what existing customers buy, and better information about the effectiveness of sales promotions.
All which can come from reporting software, and helps to provide a clue as to what reporting software might deliver by way of results.
Reporting software: a changed paradigm.
An ROI calculation has two components: the return, and the cost of the investment in question. And so far, we’ve looked at the return aspect of the calculation.
Now let’s look at the cost aspect. And specifically, not at acquiring a reporting software capability through an investment funded by capital expenditure, but acquired as an ongoing monthly service.
Do this, and two things happen. The first, obviously, is that the ROI measurably improves as the ROI denominator reduces. Because instead of a hefty upfront cost, there’s a small fixed-price initial setup cost, with the remainder of the cost coming as an affordable monthly subscription.
But the second thing to happen is that the ROI is achieved much more quickly, eliminating investment risk and uncertainty, and delivering a positive cash flow much sooner, as benefits kick in.
And those benefits start to kick in very quickly indeed. Here at Matillion, for instance, we reckon to deliver a working solution in around eight weeks, from signed order to reports being run.
Reporting software: the bottom line.
All of which serves to bring the ROI of reporting software into a much sharper focus. Tangible gains. Intangible gains. A boost to revenues and margins. And a lower cost of acquisition.
If that sounds interesting, then take a moment to review our customer case studies, or download the eBook below.