Things I’d Like to See Go Away – Unrealistic ROI and TCO Calculators

Let’s face it, customers care about Total Cost of Ownership (TCO) and Return on Investment (ROI).   These figures are a key part of most business cases that are developed to make a purchase.

And, the calculations are complex.  Actually, that is wrong.  The calculations are not complex, but understanding what to include in the calculations is not always obvious.   To help with this, many vendors create ROI and TCO calculators.

Photo by rawpixel.com from Pexels

Photo by rawpixel.com from Pexels

Unfortunately, the vast majority of these are incomplete.  And that is why I would like them to go away.

Try for yourself, search for ROI or TCO calculator.  Find one on a vendor site.   Look at the range of inputs.   Most of the ROI versions I see only talk about what the potential returns are–they rarely if ever include any details on the investment.  And those that do, often only look at the cost of their solution–not the added costs to the business (administration, training, etc.).  True, with SaaS, some of these costs (Installation, Configuration, Hardware acquisition) are eliminated or minimized, but only talking returns is not ROI.  Similar things happen with most TCO calculators.

Ask your customer if they can take forward a business case that does not outline the investment.   The answer is  pretty obvious.

What Buyers Can Do To Stop This:

Let’s face it, you could use help building your business case.  But when you see a fake calculator, immediately question the company about some of the costs that you know are part of your story.  Ask them why they don’t include the ability to add those to the calculation.

And highlight for them that delays in your business case delay—potentially forever–decisions.

What Vendors Can Do:

Be more transparent.  If you are providing a calculator for potential returns, call it that.  Don’t call it ROI.   Maybe provide that on your Web site, but offer a more complete ROI modeling tool for sales interactions.    Work with existing customers to understand the business cases they developed and then use that to flesh out the range of inputs for your ROI and TCO tools.  You might also discover some other areas of differentiation.

There are cases where ROI is difficult to determine, but there may be other approaches to the business case–take ownership of making business case easier and provide your customer with tools that are complete and not slanted to you.  That will build trust and accelerate deals.

To learn more, please visit: https://blogs.gartner.com/hank-barnes/2018/05/22/things-id-like-to-see-go-away-unrealistic-roi-and-tco-calculators/

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