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A healthcare provider once evaluated workflow automation software costing approximately $85,000 annually.
Leadership hesitated because the number felt expensive. At first glance, I understood their concern. But after reviewing operations, the situation looked completely different.
Administrative staff collectively spent nearly 600 hours monthly completing repetitive manual work. Internal labor costs averaged roughly $38 per hour.
Manual inefficiency cost exceeded $270,000 yearly. Suddenly, the software looked affordable. Even after implementation expenses, projected savings created strong financial upside.
What surprised leadership most was an unexpected secondary benefit.
Employee frustration dropped. Staff turnover improved slightly because repetitive work decreased.
Nobody originally calculated employee satisfaction into ROI projections. Sometimes business value appears in places spreadsheets miss.
The problem starts before the software even arrives
The Real reason for most SaaS failures is right before companies implement it.
Most often this error occurs during evaluation.
Businesses typically purchase software due to the fact that other businesses are using it, business leaders attend conferences and hear about it, or it’s sold to them during a business demonstration. At the time, these seem to be good, logical reasons for moving to the new home, but rarely would they survive any economic stress.
I’ve seen teams spend many weeks discussing the features they are putting in place and never ask the more difficult question:
What business problem are we trying to solve?
That’s an important question for two reasons:
Software that doesn’t have a business problem to solve is costly decoration and, if it does have a business problem to solve, it costs even more.
Using a CRM system won’t automatically enhance the performance of your sales team if there are already areas for improvement in your sales workflow. While a security platform can help address poorly established internal governance, it is not the answer. Poor leadership communication is not going to get better overnight with the use of project management software.
You Can Also Get More Helpfull Info In this Article: Why Most SaaS Rollouts Fail And How to Fix It
Technology typically reveals poor processes before it’s able to improve them.
Gartner research shows that organisations often make poor use of the purchased SaaS products as a result of poor implementation planning and poor user adoption. Software ownership and business use creates that gap and silently kills off ROI.
Why subscription pricing tells only half the story
The majority of SaaS pricing pages have a soothing appearance.
You come across something that appears to be $49 per user, $99 monthly or enterprise pricing that seems like it’s within your reach. The business is cost predictable for leadership.
But life intervenes.
Typically, the monthly subscription cost is the lowest cost factor of the actual investment.
This lesson I learned the hard way when I assisted a small to medium sized cyber security company to assess workflow automation software. Implementation time was not considered and only annual licensing costs were part of the focus.
The value of the investment, which seemed to be $30,000 annually, transformed into a $75,000 running cost once it was put in place, integrated, trained and parts due were provided.
This occurs at a much higher rate than companies are aware of.
In my experience, the key factors to consider when assessing SaaS involve subscription fees, implementation costs, integration and organizational change costs.
Here You Can Get More Infor About SaaS Subscription: SaaS Subscription Management Tools for Maximize Revenue and Reduce Churn
The subscription cost includes licensing, while the implementation process covers onboarding and setup. Integration requirements often consume technical resources, and organizations frequently overlook change management costs during budgeting. The executives are more optimistic about the resistance to the new system among employees. That opposition will cost some money.
The smartest SaaS buyers ask a slightly uncomfortable question
Prior to making any software purchase, I question leaders that they don’t expect, like:
What do we do if we don’t purchase anything?
The room becomes very still as most people are silent.
It’s common for most organizations to take for granted software is making progress. That belief leads to more unnecessary expenditure than folks would be aware of.
Sometimes they require improvements of the existing systems, rather than changes. In some cases, it is possible to solve the problem even faster than the purchase of a new platform by having the employees trained internally. And sometimes the period of six months makes it a better buying opportunity, as the vendor’s price may change or their priorities may change.
That insight, which many businesses may not accept, is that this results in a counterintuitive insight.
In fact, adding software often causes a loss of productivity, rather than a gain. It’s not something that anyone wants to say.
Typically, the first 3-6 months of implementing SaaS causes disruption. Staff reduce their pace while they are learning systems. None of the teams are happy with the process changes. Integrations break unexpectedly. It’s a challenge for managers to have consistent adoption rates.
The decrease in productivity in the short-term is expected. The error is that companies fail to take into account that dip when they are predicting ROI. When you’re calculating the ROI based on the assumption that it will be instant, the numbers are likely to turn out to be unrealistic.
Employee behavior determines ROI more than software quality
This makes executives aggrieved as it does not seem fair. Just because software is good doesn’t mean it will be successful. People determine outcomes.
An advanced engagement platform was a big investment I made in one customer success organization that I’ve worked with in the past. Leaders showed great efficiencies, as the automation features appeared to be very impressive in demonstrations.
It was not to be like that in reality.
Managers kept on using old fashioned spreadsheets due to their faith in old ways of exporting them. Staff didn’t use automation functions that were over complicated. Reporting was not consistent as there were no full fledged believers of the system.
Following a year, ROI didn’t seem to be worth it. The software used was good. The implementation strategy was not in itself.
Many people think technology slows digital transformation, but research by McKinsey & Company shows that organizational change often causes the biggest setbacks.
Adopting software isn’t a technical issue. It’s a man situation. That is important in determining the financial return.
A practical framework to Calculate Real ROI before signing a contract
Instead of making assumptions that are more likely to be optimistic, I use the following framework when supporting an organization in the decision making process for SaaS investments.
The first step is to determine the business pain that is measurable.
Not vague frustration. We could work no faster, it wasn’t our teams. Real operational pain. Perhaps, it’s too time consuming to onboard.
Customers’ support issues can take days to get fixed. Perhaps it takes too much of the staff time to adhere to compliance reporting. Perhaps there is inconsistency in sales processes and leads are lost.
You can’t measure pain, you can’t measure value of fixing the pain.
The second is a measurable result that is financial.
Ask direct questions.
- Will this software increase revenue?
- Can it reduce labor costs?
- Will it lower security risk?
- Can it delay future hiring?
- Will it improve retention?
All answers should have numbers associated.
If there are no measurable outcomes, ROI discussions switch from a money-making to an emotional discussion.
A real-world SaaS case study that changed executive opinion
Once, a healthcare provider assessed the value of the workflow automation software – it was about $85,000 per year.
Governors were reluctant as there were too many numbers. I could see in their eyes they had a concern, but just on a first glance. However, when he had a look at the operations, it was a completely different picture.
Almost 600 hours of repetitive administrative work was completed each month by the administrative staff. Average of the internal labour costs was approximately $38 per hour.
The inefficiency of manual operations was more than $270,000 per year. Now all of a sudden, the software seemed like it was in the ballpark for a price. After the costs of implementation, projected savings were significant, and offered a financial upside.
One benefit which leadership were not expecting was the secondary benefit.
Employee frustration dropped. There was some reduction in repetitive work and this was reflected in higher staff turnover.
No one ever thought to factor in employee satisfaction when they used to project ROI. Value in the business sometimes seems to be outside of the scope of spreadsheets.
Why free trials often create false confidence
This aspect needs more attention, as vendors don’t like talking about it in a straight forward manner.
The idea behind free trials is to generate positive perceptions.
Additional help and assistance are provided. Data Environments are clean. New employees quickly come up to speed on the job with the dedicated help and resources. Staff are more focused as leadership are monitoring. Real environments look like they’re a bit dirtier.
I always suggest to do a small pilot with some employees who are skeptical of the software, not with enthusiastic employees, before making a software commitment.
It sounds crazy, but having a few users who aren’t on board with you will show up the irritation quicker.
With a successful rollout of the platform the risk reduces if the employees have been made resistant to the platform. As soon as there is a problem with the power users, the leadership should rethink. I believe that the outcome of the Pilots is more important than pretty demos.
How to Calculate Real ROI using a practical formula
In the end, it’s about financial return. ROI of SaaS remains as it is.
The vast majority of organizations tend to be quite basic:
ROI = Total cost– Net gain from the investment / Total cost ×100
It’s not about the formula itself that is the challenge. The one thing which is a challenge is honesty.
There are a lot of companies that don’t account for everything that it entails and that overestimate gains. In determining ROI of software, make sure to count everything!
While subscription costs are important, there are also a number of onboarding costs and time considerations, lost productivity, training and development, consultant fees, and temporary productivity losses.
Featuring “hidden costs” is a way to have an optimistic false sense of security. Then an illusion of optimism takes its toll on the budget.
What you should do this week before buying software
Emails with SaaS renewals will show up in your renewal list. Select the three tools that are the most costly. Then follow the 4 uncomfortable questions.
- Are employees consistently using the platform?
- Can leadership measure business value clearly?
- Would removing this software noticeably hurt operations?
- Are unused licenses quietly wasting money?
I’ve seen companies cut software costs by nearly 20% without hurting productivity simply by removing unnecessary licenses and sharing tools where multiple people could use them effectively.
That process feels boring. But boring operational discipline often creates better ROI than chasing shiny new platforms.
Why cheaper SaaS sometimes becomes the expensive decision
Of course, when looking at a property to purchase, most of the time, buyers will be paying attention to lower prices. That makes sense. However, often there are hidden long term costs when it comes to cheaper software.
I’ve seen people go with sub par tools that are cheap and have minimal integrations, poor reporting and not have the automation.I’ve seen companies pick whatever tool for minimal cost has poor integrations and reporting and limited automation capabilities and within a year change the tools.
Migrant costs were twice as much as spending. Internal trust dropped. Employee frustration increased. Momentum disappeared.
In some cases, however, the increased costs for greater ecosystem compatibility are worthwhile to the long-term economic benefits.
However, it doesn’t necessarily mean that any expensive softwares are always better. It’s about the price of the business and not just the monthly price.
Before signing the contract, pause for one honest conversation
Software vendors know how to build a confidence. That is their job. It’s different for you. It’s not features you’re purchasing, it’s the people. You are purchasing results!
Even if a SaaS solution is looking very nice, if it doesn’t have a clear path of revenue growth, measurable inefficiency reduction, risk exposure reduction or delay in operational cost, then the ROI case is highly questionable.
Some of the best organisations that I have worked with don’t make a rush of software decisions. They challenge assumptions, ask questions of vendors and confirm results, rather than approving budgets.
If you’re really looking for ways to Calculate Real ROI before making an investment in ANY SaaS software, then make one action this week to prove it with actual operational data; audit one software subscription that you already have. You may find that improving your financial situation first is the best approach before making any new purchases.
Author Bio
Talha Qureshi is an enterprise technology analyst and blogger with over a decade of hands-on experience across cybersecurity, cloud infrastructure, B2B SaaS, and enterprise AI. He explores the gap between how companies market enterprise technology and how it actually performs in real-world organizational environments.
