A simple pragmatic way of measuring ROI
When buying new software we must consider it's return on investment. Making assumptions and projections on its possible gains is not accurate or relevant to your business environment and will change from company to company, so we have to take a low risk approach to actually measuring it in situ.
Here is a pragmatic way of achieving this:
Stage 1. Identify current ROI. One of the key metrics in Exec Search is "billing per consultant" for consultant productivity. Executive search software will directly affect productivity and "billing per consultant" will benchmark this. Identify "billing per consultant" per month for the last 6 months (3 months minimum) to even-out monthly fluctuations.
Stage 2. Negotiate a short term use from you favoured software supplier for an extended trial, you might have to pay monthly but do not take on long term commitments to buy, until you have calculated the ROI. It is not pragmatic to run more than one trial so take the one you think you might buy based on the usual criteria and use this to validate the decision.
Stage 3. Install the software and identify a few staff that can work on the trial in isolation of the rest of the company. Then measure the "billing per consultant" per month for the last 4 months and compare to the data in Stage 1. Allow a month for the staff to get up to speed before measuring ROI so on-boarding is not included.
Stage 4. Review ROI. Check the live results against the previous set of data with the old system. If ROI is positive keep it, if not and ROI is negative, analyse the data to check no mistakes were made and if accurate, Change to a new supplier and re-evaluate.
The key to any ROI calculation is factual, accurate results that can be extracted by using this method, far better than relying on how you feel about the salesperson and what they tell you, no matter how nice they are. Don't forget they are paid to sell more product whether you will benefit from it or not and are usually very nice people.
ROI has become popular in the last few decades as a general purpose metric for rating capital purchases, projects, programs, and initiatives. Because the metric is popular and widely used, decision makers and analysts should remember that return on investment figures are often produced by those with a poor grasp of the metric's weaknesses and unique data needs. Some analysts say that simple ROI measures profitability. While that statement is accurate and useful, other business people borrow a term from the field of economics and say that ROI means efficiency. That usage is arguably less useful because many people use the same term—efficiency—to describe the meaning of quite a few other metrics, including Internal rate of return IRR, payback period, inventory turns, and return on capital employed (ROCE).