How can we tell if digitalization is truly worth the investment?
Whether you’re securing budget approval in the public sector or a board‑room green light in a private company, the question behind any digital‑transformation proposal is the same: is it worth the investment?
Industry data shows that organizations that successfully automate their processes see returns of 30–200 percent within the first year—but those numbers only materialize when you account for the “hidden” factors that often fly under the radar.
This blog walks you through five steps to calculate true ROI and to fold in qualitative gains such as higher employee satisfaction and reduced reputational risk.
1. Gather complete input data
To get a realistic picture of the total investment, start by mapping four primary cost categories and verifying each one in your own system:
Licensing and maintenance
Include annual or monthly software licences, any cloud‑hosting fees, and the contracted technical‑support package. These figures come straight from the vendor’s quote or draft agreement. If you run an on‑prem solution, add the cost of server hardware plus power and cooling for the server room.Implementation and integrations
This covers consultant work: system configuration, legacy‑data migration, custom module development, and connections to your existing ERP or HR platform. Prices are usually listed in the project plan—either fixed‑fee or time‑and‑materials. If you don’t yet have a final quote, estimate a range based on comparable projects in your industry.Internal resources
Often overlooked, yet crucial. Count the hours your IT team, super‑users, and other employees will spend on testing or training. Use HR data or average salary costs to set an hourly rate. In the public sector these hours may not hit the budget directly, but they still factor into ROI as an opportunity cost.Process‑change costs
Digitalization rarely happens without tweaking procedures and internal communications. Factor in management time for process‑redesign workshops, drafting new policies, and producing internal manuals or e‑learning content. If you hire external change‑management specialists, include their fees as well.
Pro tip: Build a simple Excel sheet listing every line item, the estimated amount, and its source (quote, contract, internal record). When it’s time to present ROI to the CEO or board, you’ll be able to show that every number is backed by a concrete document—not a rough guess.
2. List (and expand) the direct benefits
Digitalization is easiest to “sell” when you can show exactly where the money stays in the organization or institution. Alongside the three core benefits from the guide, let’s add two more that often tip the decision:
Labor‑hour savings
First record how many minutes or hours each task takes before digitalization, then how long it takes afterward. Multiply the difference by the average cost per labor minute. Don’t forget to include managers’ time spent on review and approval—those are the most expensive hours.Reduced errors
Count the complaints, corrections, or penalties from the previous period and calculate the average cost of a single error. Multiply the reduction in errors after digitalization by that cost. In the public sector, also emphasize the lower risk of audit findings.Faster cycle time (time‑to‑completion)
Measure how many days or hours an invoice, contract, or letter currently needs to move through the entire process, and how long it will take once the new system is in place. In the private sector, a faster process means better cash flow; in public institutions, it means quicker service for citizens. Pay special attention to the “waiting time” between steps—this is often where the biggest savings hide.Lower material and archive costs
Reduced consumption of paper, toner, envelopes, and courier services—as well as less physical archive space. Multiply the square meters you free up by the rental or maintenance price. In larger organizations, this delivers tens of thousands of marks in annual savings.
Formula and additional examples
General formula (per process):
Number of transactions × (Old cost – New cost) = Annual savings
Example 1 – Invoices
40,000 invoices × (10 min – 4 min) × 0.30 BAM/min = 72,000 BAM annually.
Example 2 – Incoming correspondence in public administration
25,000 memos per year
Old process: 6 min per memo
New process: 2 min per memo
Average labor cost: 0.25 BAM/min
25,000 × (6 – 2) × 0.25 BAM = 25,000 BAM annually.
If we add 3,000 BAM saved on paper and archive costs plus 1,250 BAM from fewer classification errors, the total direct benefit exceeds 29,250 BAM for just one process—which often brings the payback period below 12 months.
Note: Always use your own real numbers and attach supporting documents; this turns ROI into a solid financial argument that’s hard to dispute.
3. Add “hidden” (indirect) benefits
When you focus solely on financial figures, decision‑makers may see digitalization as a cold numbers game. Yet the real wins often lie in the so‑called soft benefits—results that don’t easily fit into an Excel sheet but make a clear difference in practice. Here’s how to frame them:
Compliance and data security
A system that automatically logs every document change, keeps audit trails, and applies access controls reduces the risk of audit findings and penalties. The point isn’t just to “avoid fines” but to demonstrate to partners and clients that their data is truly secure. Conduct internal mini‑audits before and after implementation: fewer findings = concrete proof of value.
Employee satisfaction
Manual data entry, searching for the “right” document version, and endless phone calls to chase approvals create frustration. When that burden disappears, employees can focus on analysis, planning, and customer service. Measure this through internal surveys (Employee NPS) or simply by tracking staff turnover. Less stress and higher productivity naturally translate into better financial results over time.
Transparency and faster decision‑making
A centralized system gives managers full visibility of processes in real time—no need to chase Excel reports or manually compile summaries. The time from request to final decision shortens, which means quicker market response for private companies and more efficient, transparent governance in the public sector.
User or citizen experience
When an invoice, contract, or letter moves through the system in half the time, the client or citizen feels the improvement: shorter deadlines, clear notifications, and fewer “lost” documents. Measure this with satisfaction surveys (CSAT) or simply by counting repeat inquiries to your call center. Fewer calls mean you’ve already answered their questions properly the first time.
Crisis resilience and remote work
Digital processes enable teams to keep working from any location, without relying on physical archives or paper files. In times of disruption (floods, strikes, pandemics), this means shorter downtimes and faster recovery—a benefit that may not be visible every day but is critical when it matters most.
Studies show that up to 50% of the total value of automation comes from these “softer” benefits, such as improved user satisfaction and faster access to data. (Source: eWizard)
4. Define the time frame and payback threshold
Once you’ve mapped out estimated costs and all direct and indirect benefits, the key question remains: how quickly will the investment pay off, and how far into the future should you look? Here are the steps worth taking to make your ROI realistic and credible for both finance teams and the operational staff managing the project.
a) Define the time frame
The standard practice is to analyze over a three- to five-year period. A shorter horizon (less than three years) might underestimate benefits that accumulate over time, while a longer span can “water down” the true impact.
In the public sector, a four-year cycle is often used to align with budget planning, while private companies typically choose a three-year horizon to cover the full investment and payback cycle.
b) Calculate the payback period
The payback period is the point when cumulative benefits exceed cumulative costs.
The ideal target: payback within 18 months. Anything longer requires additional justification (such as regulatory requirements or strategic value).
If your forecast shows a payback of 24 or 36 months, consider a phased approach: start by digitalizing the processes with the highest transaction volumes and fastest time-to-cash, then tackle more complex flows in phase two.
c) Apply the appropriate discount rate
The discount rate reflects the cost of capital or the opportunity cost of money over time.
In the public sector, use the rate specified by the Ministry of Finance.
In the private sector, the CFO will typically apply the Weighted Average Cost of Capital (WACC) or an internal hurdle rate.
Applying the discount rate converts future savings into Net Present Value (NPV), giving a more accurate picture of the true return.
d) Build three scenarios
Conservative: Assume reduced benefits (e.g., 70% of projected savings) and potential delays in the go-live date.
Realistic: Use the most likely projections without too much optimism or pessimism.
Optimistic: Full benefits plus faster user adoption.
Comparing these three scenarios will help you see how changes in assumptions affect the payback period and NPV.
Step summary
Decide whether to model over 3, 4, or 5 years, in line with your budget cycle.
Calculate the payback period and aim for ≤ 18 months (or plan phased implementation).
Apply the prescribed discount rate to determine NPV.
Prepare conservative, realistic, and optimistic scenarios to clearly show the range of risks and benefits.
If you’ve done a solid job mapping costs and benefits, these calculations will confirm that digitalization isn’t just a tech trend—it’s a sound financial decision, even when you factor in different risks and capital costs.
Reference stat: 80% of organizations accelerate digitalization because they see tangible financial returns within the first year. (Source: Cflow).
Conclusion and Next Steps
ROI is not just a dry number; when you present financial savings alongside “soft” gains—faster decisions, happier employees, reduced regulatory risk—the chances of project approval rise significantly. Experience with business process digitalization shows that a well-executed transformation can cut overall operating costs by 10–50% (Source: Software Oasis), but the true value depends entirely on your specific processes and objectives.
Support for every sector—public or private
Whether you work in a public institution aiming to boost transparency and efficiency, or you’re part of a private company looking to streamline internal workflows, the right support makes all the difference.
That’s why we’ve prepared two practical guides—one for public institutions and one for private organizations—detailing how document and mail management processes are implemented using the OWIS system. While the guides are built around OWIS as an example, their content is useful for anyone considering a similar system. Through real-world examples and actionable tips, they show how to approach digitalization in a smart, sustainable way.