Is Your Tech Spend Driving Profit?
Maximizing your return on technology investments is simpler than you think - if you diligently assess for impact.
As AI investments reach unprecedented levels – and reports about its impact vary – the pressure to demonstrate clear ROI from technology spending has never been higher. Too many companies are drowning in software subscriptions and consultant fees without measurable business impact to show for it. Here's how to ensure your tech investments actually drive profit rather than just drain resources.
1. Establish Meaningful ROI Metrics with New Vendors
When vetting and signing new vendors, work with them to ensure that they are tracking and measuring ROI in real, meaningful ways that are specific to your business - not just marketing-friendly metrics that help enable their next sale.
Hold them to those numbers in POCs or initial contracts. This is especially true for AI-enabled solutions. Before investing, make sure that you know where to focus your energies: are you saving on salaries, accelerating speed to market, or increasing conversion rates? If there isn't a measurable and substantial financial benefit to a particular AI investment, keep looking for the product or service that can deliver.
The challenge with many technology vendors is that they present impressive-sounding metrics that don't translate directly to your bottom line. A marketing automation platform might boast about "increasing engagement by 300%" or an AI tool might promise to "boost productivity by 40%," but what do these numbers actually mean for your specific business context? Engagement doesn't automatically equal revenue, and productivity gains are meaningless if they don't translate to cost savings or increased output that drives profit.
Ask how those numbers are calculated, and be savvy about applying them to your business. If you're evaluating a customer relationship management system, for example, don't settle for metrics like "improved customer satisfaction scores." Demand specifics: "reduce customer acquisition cost by 15%" or "increase customer lifetime value by $500 per client." For AI-powered analytics tools, move beyond vague promises of "better insights" and establish clear targets like "reduce time to identify profitable customer segments from 2 weeks to 3 days" or "increase prediction accuracy for inventory needs by 25%, reducing carrying costs."
During proof-of-concept phases, structure agreements with clear success criteria and measurable benchmarks. If a vendor's solution doesn't meet these predetermined targets within the trial period, you should have the contractual flexibility to walk away without penalty. This approach not only protects your investment but also forces vendors to deliver on their promises rather than relying on aspirational marketing language.
For AI solutions specifically, be particularly rigorous about defining where value will be created. AI implementations often require significant upfront investment in data preparation, staff training, and system integration. The payback needs to be substantial and measurable to justify these costs. Whether you're automating customer service responses, optimizing supply chain decisions, or enhancing product recommendations, establish clear baseline metrics before implementation and track improvements rigorously.
2. Set Clear ROI Expectations for Technology Consultants
Consultants can be great at helping your team adopt a new technology or optimize tech-enabled workflows. But if you're hiring an AI- or digital-transformation consultant, the same advice on ROI applies: set a clear expectation about what kind of cost savings, speed to market, or conversion rates they will need to find or produce to justify the price of their engagement.
Before engaging any consultant, establish a clear statement of work that includes specific, quantifiable outcomes they're responsible for achieving. This isn't just about deliverables like "implement new CRM system" or "train staff on AI tools." It's about business results that can be measured in dollars and cents.
Then structure consultant agreements with performance-based components whenever possible. If a consultant claims they can help you implement a new e-commerce platform that will increase online sales by 30%, tie a portion of their compensation to actually achieving that result. If they're optimizing your marketing technology stack to improve conversion rates, their success should be measured by actual conversion improvements, not just by completing the technical implementation.
Consider structuring longer consulting engagements with milestone-based payments tied to achieving specific ROI targets. This approach aligns consultant incentives with your business outcomes and provides natural off-ramps if the engagement isn't delivering expected value. It also forces consultants to focus on business impact rather than just technical implementation.
3. Implementing Comprehensive Tech Stack Auditing
Please, please, please - make sure there is someone on your team auditing your tech stack all the time, and especially the recurring payments on the company card. Don’t let a storm of forgotten expenses quietly drain thousands of dollars from your budget.
Most companies have far more software subscriptions than they realize, spread across different departments, credit cards, and user accounts. Without systematic tracking, it's easy to continue paying for tools that are rarely used or have been replaced by better alternatives.
Establish a monthly tech audit process where someone reviews all recurring software expenses. This should include not just the obvious enterprise subscriptions, but also smaller tools that individual team members might have signed up for and expensed. Create a centralized inventory that tracks each tool's purpose, primary users, cost, renewal dates, and most importantly, actual usage metrics when available.
Many software providers offer usage analytics that can help you understand whether you're getting value from your investment. If a project management tool shows that only 20% of your licensed users have logged in during the past three months, that's a clear signal to either reduce your user count or find a better solution. Similarly, if your team is paying for advanced features in a marketing automation platform but only using basic email functionality, you might achieve the same results with a less expensive alternative.
Set up calendar reminders before major renewal dates to evaluate whether each tool is still delivering value. This is particularly important for annual subscriptions, which can be easy to forget about until the large charge appears on your credit card statement. Create a simple evaluation framework that considers usage levels, business impact, cost per user, and availability of alternatives.
Don't forget to audit integrations and add-ons, which can significantly increase the cost of your primary software platforms. That CRM system might have started at $50 per month, but with additional modules for reporting, automation, and integrations, it could now cost $300 monthly. Regularly assess whether these add-ons are providing proportional value or if you could achieve similar functionality through other means.
Pro-Tip: Make sure that each platform is assigned to a department owner as well as a tech owner. Because they know what gets used in their day-to-day work better than you do. And canceling a necessary suite of tools causes disruption, inefficiency, and morale loss that can be hard to recoup.
No matter what kind of business you run, starting with these basics ensures that your tech stack is driving efficiency and productivity - not sinking your profit margin.
Your profit margin might be hiding where you least expect it - our team can help you find it. Book a call with a Level pro today.
