At the recent 2013 Restaurant Executive Summit, a group of IT, finance, operations and vendor executives gathered at a luncheon topic table to deliberate on how best to ensure getting return on technology investments. The discussion was moderated by Steve Brooks, director of information systems, at Tumbleweed Tex Mex Grill and Margarita Bar. He was joined by executives from Mr. Goodcents Sub Pasta, Norwegian Cruise Line, Smitty’s Family Restaurants, Restaurant Magic, Spartan Computer Services and Custom Business Solutions. Here are their insights.
Finding the ROI formula
The general consensus at the table was that it can be difficult to quantify all the costs from a technology investment, but if all costs are tracked, wise decisions can be made. Total cost of ownership (TCO) was discussed as the best way to evaluate ROI. TCO includes training, configuration, installation, license costs, hardware, software, maintenance contracts, ongoing maintenance, and life of the technology. Always get at least three bids and ask your peers in other companies their opinion. Test before you go to all stores or as the panel agreed, “walk before you run.”
Technology ROI used to be about hardware and software, but Software as a Service (SaaS) is growing and replacing traditional software. Often SaaS reduces or eliminates costs like contract maintenance, installation, hardware and upgrading costs. Rather than spend upfront money, the SaaS is a monthly fee over time. We had examples of how this is more cost effective compared to traditional models. For example if you have to upgrade Outlook and you have an old server, the cost of Outlook365 is often less over the life of a server then purchasing software, installing it, maintaining and replacing it in five to seven years. The finance execs agreed that spending less money over time is great, and paying for it over time is even better.
The software/hardware solution/debate
Many software salesmen list benefits such as reducing costs pertaining to software ROI. If food costs drops we can take the percentage drop as a real result. The same holds true with labor reduction or controllables. So if the software costs $50 a store per month including the fees, maintenance and installation and benefits are $200 per store per month and we would have a 300% ROI. That would be an easy decision.
Hardware upgrades are not always that easy. While the hardware may be necessary, the items to consider may be larger. Hardware often has a much smaller ROI, but is essential to operation. One vendor offered a valid and valuable suggestion, advising the execs to “ask your vendor when the average first day for a service call occurs or when the second call occurs.” Executives agreed that reliability is a major factor in determining ROI.
Risk and reward of being first
The executives discussed the fact that early adopters often are charged more money for new products. The table said the “sexiness factor often short circuits the useful factor.” Early adopters have risk, but does the benefit outweigh the risk? You can have a competitive advantage with a great ROI or end up with products that do not stick around and much higher costs.
Other items to consider are employee productivity and efficiencies your business may gain. And if you do not upgrade in time, there is the risk of lower productivity, turnover, maintenance and the cost of being completely down when items break down a lot.
Consider training costs, configuration, installation, license costs, hardware, software, maintenance contracts, ongoing maintenance, and life of the technology. TCO is crucial in choosing the right technology, but waiting too long or only looking at upfront cost can be a mistake that lowers the ROI to a loss or a result below your company’s standard. Ask your peers and get bids before making your final choice. As the restaurant executives in this discussion concur, “It’s best to walk before you run.”