How To Challenge A Software Vendor's ROI Calculation
At some point during a software evaluation, a vendor will present a business case.
The presentation often includes:
- Cost savings
- Productivity improvements
- Revenue growth
- Risk reduction
- Return on investment (ROI)
The numbers can look impressive.
A projected 300% ROI.
Payback in 12 months.
Millions of dollars in future benefits.
The question buyers should ask is not:
Is this ROI calculation correct?
The better question is:
What assumptions does this ROI calculation depend on?
Because assumptions are where most business cases succeed or fail.
Why Vendors Build ROI Models
Most enterprise software purchases require a business justification.
Features alone rarely secure budget approval.
Executives want to understand:
- Expected benefits
- Financial impact
- Risks
- Time to value
This is why many software companies employ:
- Business Value Advisors
- Business Value Consultants
- Value Engineers
Their role is to help quantify the value of a proposed investment.
The Most Important Part Of Any ROI Model
Most buyers focus on the final number.
Experienced buyers focus on the assumptions.
For example:
A vendor may assume:
- 90% user adoption
- Immediate productivity gains
- Full organisational compliance
- Minimal implementation delays
These assumptions can dramatically affect the projected return.
Small changes often create very different outcomes.
The Five Questions Every Buyer Should Ask
1. Where Did These Numbers Come From?
Ask:
Are these benchmarks based on customers similar to us?
A benchmark from a global bank may not apply to a mid-sized manufacturer.
2. What Happens If Adoption Is Slower?
Most software projects take longer to reach full adoption than expected.
Ask the vendor to model:
- 25% adoption
- 50% adoption
- 75% adoption
rather than only showing best-case scenarios.
3. What Costs Have Been Excluded?
Many ROI models focus heavily on benefits.
Ensure costs include:
- Implementation
- Training
- Change management
- Internal resources
- Ongoing administration
4. What Assumptions Have The Greatest Impact?
Every model has a few variables that drive most of the outcome.
Identify them.
These are often more important than the final ROI figure.
5. What Does A Conservative Scenario Look Like?
A strong business case should survive conservative assumptions.
If the investment only works under perfect conditions, that should be understood.
Why This Matters
A business value assessment is not a prediction.
It is a model.
Models are useful.
But all models depend on assumptions.
The purpose of challenging a business case is not to discredit the vendor.
It is to improve decision quality.
What Good Buyers Do Differently
Strong buyers:
- Validate assumptions
- Stress-test projections
- Compare scenarios
- Focus on outcomes
- Build their own independent business case
They understand that the objective is not to win an argument.
The objective is to make a better investment decision.
The Buyer's Side Take
The next time a vendor presents a business value assessment, spend less time looking at the final ROI figure and more time understanding how it was calculated.
The assumptions behind the model often tell you far more than the headline number.
The smartest buyers don't accept ROI models.
They interrogate them.
