This year at FINOS we are focusing on one of FINOS' key existing projects: Open Source Readiness. This is FINOS' term for helping the finance industry "do open source properly".
Open-Source Return on Investment (ROI): Metrics to consider Value
"I don't think we try to measure ROI - it's a cost. Engagement is a benefit. As is talent-acquisition."
"We're not at the stage of measuring it."
"We can justify based on maintenance of our bug-fixes"
"We have some success metrics around governance, such as risk-reduction".
All of these comments may in some form align to your own experience in considering (and explaining) both open source software development, consumption, and contribution. Since businesses began, ROI has been considered an incredibly valuable financial measurement to determine how your company will deliver maximum output and profit. As the 21st century has progressed, businesses of every size are leveraging metrics and data-driven decisions to decide on effective ROI for their business model.
As the use and development of technology has grown in every enterprise, it’s been increasingly important to understand ROI for IT investment. With this in mind, the goal of software development is to generate more revenue than it costs to create (or acquire) the software product or, at the very least, recoup the investment made into the software while improving your processes, competitive advantage, or decision making abilities. Closely related to ROI, software Total Cost of Ownership (TCO) means understanding all of the costs in the software lifecycle, not only to develop it, but operations, maintenance and support.
ROI has a tremendous impact on the success of the OSS program. Delivering business value is a critical facet of organizational maturity. Being able to define ROI can help improve the ability to make “build vs buy” decisions, and decide if the open source project can benefit from external contributors to support its lifecycle management.
ROI Calculator Workbook
While there are many different ways to calculate ROI, one example was developed by the Demonstrating Value Initiative. The Initiative has established a workbook to use as a guide for software ROI. This workbook is designed to calculate a return on investment (ROI) for new software like a CRM (Customer Relationship Management system). Doing this can help you understand if a proposed purchase is worthwhile, and can help you make a case for investment to others.
The calculator includes an example, which shows you a complete calculation. The user inputs basic assumptions as well as data about costs and savings, both upfront and into the future. It includes cost calculations for staff time involved in implementation and training.
You can download the spreadsheet-based calculator here.
Author: Jim St. Clair
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