Calculating ROI from Power Platform Efficiency Projects: A Practical Guide for Businesses

In today’s fast-paced business environment, organizations are increasingly adopting platforms like Microsoft Power Platform to drive operational efficiency, automate workflows, and reduce manual tasks. But how can you quantify the impact of these projects? One key way is by calculating the return on investment (ROI). This article will guide you through the process of calculating ROI for efficiency projects, particularly those using Power Platform and Microsoft apps.

The ROI Formula

The basic ROI formula is:

Where:

• Net Benefit of the Project = Total benefits (savings) from the project – Total costs (investment)
• Project Cost = The total investment made in the Power Platform solution, including licenses, development time, and training.

Now, let’s look at how to break this down into practical steps for a Power Platform efficiency project.

1. Estimating the Total Benefits

For a typical efficiency project, benefits are primarily derived from time savings and error reduction. Here’s how to calculate these:

A) Time Savings

Time savings are the most common source of benefit. To calculate this, follow these steps:

• Estimate Hours Saved per Employee: Identify how much time is saved through automation. For example, if a manual process took 5 hours per week and your Power Automate solution reduces it to 1 hour, you save 4 hours per week.
• Calculate Annual Hours Saved: Multiply the hours saved per week by the number of weeks in a year (typically 48 weeks considering holidays and leave).

• Convert to Dollar Value: Using the average hourly wage in Australia, we can convert the time savings into a dollar value. As of 2024, the average Australian hourly wage is approximately AUD $44.00.

• Multiply by Number of Employees: If the solution is applied to 10 employees, multiply the time savings value by the number of affected staff.

B) Error Reduction Savings

Automation can also reduce errors in data entry or processing, which in turn reduces costly rework. Calculate this by estimating:

• Cost of Errors: If each error costs AUD $200 to correct, and the automation reduces 50 errors per year, your savings would be:

Example:

Let’s say a business implements a Power Automate flow that saves 4 hours per week for 10 employees, and reduces errors by 30 annually, each costing AUD $250 to correct.

• Time Savings:

• Error Reduction Savings:

• Total Savings:

2. Calculating the Project Cost

Next, calculate the total cost of the Power Platform project. This typically includes:

• Licensing Costs: For Power Platform, pricing is based on the number of users and the specific tools used (e.g., Power Apps, Power Automate). For example, a Power Automate per-user plan costs approximately AUD $21.90 per month.
• Development Time: Estimate the number of hours required to build the solution, and multiply this by the hourly rate for developers (assumed at AUD $90/hour).
• Training Costs: Include any time or resources spent on training staff to use the new system.

Example:

• Licensing:

• Development Time:

• Training:

• Total Project Cost:

3. Final ROI Calculation

Now that we have the total savings and total project costs, we can calculate the ROI.

Conclusion

In this example, the ROI is over 600%, demonstrating the value of investing in Power Platform solutions. By streamlining processes, reducing errors, and saving time, organizations can see significant financial returns from their efficiency projects.

When calculating ROI for your next Power Platform project, use these steps and tailor the formulas to your specific situation. With the right strategy, Power Platform can become a powerful tool for driving both operational efficiency and financial growth.