You know your company needs a new DAM project, but persuading your boss is going to be damn hard! Your boss is probably a true numbers person who wants to see the return on investment (ROI). How do you go about justifying the project, calculating the ROI and convincing your boss?
You’re off to a good start if you’ve evaluated the right Digital Asset Management (DAM) solution for your company and have estimated what the DAM Project is going to cost by determining the Total Cost of Ownership (TCO).
When justifying a DAM project, you need to consider both tangible and intangible value. There are two basic ways to calculate tangible value: reduced cost or increased revenue. But intangible value of the DAM project can be equally important, as it includes everything from reduced risk to legal requirements to employee morale. You have to convince your boss that not having a DAM isn't only a missed opportunity to increase efficiency and reduce costs, but may also pose a significant business risk.
How to Calculate ROI
Understanding how you are going to use the new DAM solution and determining the TCO for the project will provide all the information you need to calculate the ROI.
ROI is a simple formula: (gain from investment - cost of investment)/cost of investment
If the project saves money or increases revenue more than it costs over the life of the project (usually 3-5 years) then the project is worth doing. Simple…right?
All you need to do is figure out (1) how much money the project will save the company and/or (2) how much it will increase revenues. The combination of the two is usually the best approach to estimating the maximum ROI.
Don’t make the mistake of using reduced work hours as a cost-saving justification. For example, if the DAM project reduces the number of hours it takes an employee to do his or her job, this probably will NOT reduce the bottom line. The only way to justify cost savings for reduced work hours is by eliminating staff or reducing overtime pay. Nobody wants to be the person that suggests reducing the staff.
Instead, look to save by finding ways to reuse and repurpose assets. This may eliminate or reduce the need to purchase 3rdparty assets, and usually improves collaboration between teams.
Another place to look for cost reduction is by eliminating and/or consolidating legacy systems, which will yield lower IT support & maintenance costs. Keep in mind these costs will not go away on day one.
Start by looking at how the DAM can improve your competitive advantage by providing faster time-to-market for development of cross-functional digital products.
Look at how the project will increase market share & advertising revenue opportunities by bringing more products to market.
Look for upsell opportunities that can yield new revenue streams.
Don’t exaggerate the revenue opportunities. Typically the accounting teams will evaluate project justifications based on ROI, net operating profit after tax (NOPAT) or Internal Rate of Return (IRR) calculations targets. The rule of thumb is “if the numbers are too good to be true, they probably are”.
Based on your institutional knowledge you will probably find many more opportunities to reduce costs and increase revenue. Make sure your justifications are real.
Armed with the TCO, reduced cost, increased revenue and project benefits, you will be able to confidently walk into you boss’ office and say “Let’s get this DAM project started!”