10 Tangible Benefits Examples and Intangible Benefits Examples

No project will be initiated without some or the other benefit.  Below are the most common types of project benefits within IT Projects. This is not an exhaustive list but has the most commonly recurring benefits.

Sometimes the benefits can overlap with each other. In reality the benefits will be specific to a given project but will generally fall into one of the below categories.

Project Benefits Examples : 10 Types of Tangible and Intangible Benefits
Project Benefits Examples

What is a project benefit?

Long story short, benefits are the reason why projects get started. We do projects because we want to gain something from doing it, that is, wait for it….benefits! 

Thus, a project benefit can be described as the perceived positive and measurable impact of change by the project stakeholders (APM). There are diverse types of benefits but the most common way to categorize them is in Tangible and Intangible. 

To effectively evaluate project benefits there needs to be processes and methods in place to determine how this is done, that are agreed to at the beginning of the project. It's also crucial that there's been an agreement on the approaches to benefits and performance management. Finally, there must be change management approaches defined as well as project processes that provide a support system for the benefits management.

Other requirements that are necessary when evaluating benefits range from having an expert to undertake this process with enough time to spend analyzing these, agreed budgets for the project and an understanding of how stakeholders and departments may be affected.

What are Tangible and Intangible Benefits?

Tangible, or ‘hard’ benefits, refer to benefits that are quantifiable, usually in monetary or time terms, such as dollars saved or gained, lead time reduction, or improvements in productivity.

The tangible benefits are generally in dollars or time saved. The time saved can be converted to dollars by applying a hourly rate or daily rate

Intangible, or ‘soft’ benefits are more difficult to measure but that does not mean that they are less important. This kind of benefits can include aspects such as increased transparency, increased reputation, or increased satisfaction, for example. Examples of such benefits are customer satisfaction, enhanced use experience etc.

Some key points to remember when working with project benefits - 

  • Project Benefit Management is a key KPI in many organisations. Especially the top brass of the company are interested in what benefits a project gives to the organisation. 
  • In my opinion benefits tracking and realization is one of the most ignored areas of project management.
  • When starting the project many people try to exaggerate the benefits to get the project approved. 
  • Once the project starts everyone is occupied with completing the project and the benefits are given low priority. So, it is important there should be section for benefits tracking in project status report or project dashboards.
  • The finance department is always keen on the project benefits because they need to know the ROI and when the project will be able to pay it self up.

  • In many companies it is considered good if the project pays itself in 1 - 3 years. So, if a project cost is $100,000 and the estimated return is $25,000 then the project will pay itself in 4 years.
  • Projects benefits are documented in the business case or project proposal document. In case of tangible benefits the project manager needs to make sure they have all the information required to explain how the hours / money saved was calculated.  
  • The senior management will focus a lot on dollar figures so you should not publish dollar savings unless you are absolutely sure.
  • Many times business cases are rejected because they do not have enough benefit information.
  • It is a good practice to have a benefit owner assigned to each benefit Owner. The owner of the benefit is then responsible to make sure the benefits are realized.
  • It is also very important to make sure that you highlight the fact the benefits are estimations and may change. Often at early stages of the project there is not enough time available to do a detailed analysis so it very important to highlight all the assumptions you have made.
  • It is important to know How to Calculate Tangible Project Benefits as that has a huge impact on the approval of the project business case.

Tangible Benefits. 

Increased Revenue 

  • The most common type of benefit and a very broad category. 
  • Increased revenue is a benefit when a project has a direct impact on the revenue of the organisation. 
  • The additional revenue  could be coming from a new product launch or by providing an offer that could attract an existing customers.
  • When stating revenue as a benefit make sure you put a precise dollar value against the benefit. Also, add an additional information you have so that the person reading your case will get all the details they need.
  • Examples are increased sales or increased subscription.

Resource Cost Savings

  • When systems are automated this benefit is obvious as automation can save manual process time. This benefit can also realize when system issues are fixed.
  • Often system changes are aimed at making processes efficient so it is very common that a manual task will not be required after the system changes are implemented.
  • This benefit could mean that the organisation can make some roles redundant or relocate some roles to a different department. 

  • This one of the most sensitive benefits as it affects people and can cause an issue if not handled discreetly.
  • In some cases systems which are old and need specialized skills will need expense manpower. If the project gets rid of the old system then the expensive resource will not be required.
  • Examples are resource reduction, resource optimization, cross departments movement which have reduce the company resource plans.

Hardware Cost Savings

  • Some IT Projects replace the existing hardware with new hardware which can be less expensive.
  • The project could also migrate data from server scattered across to one single server.
  • The new hardware can require less maintenance which will result is cost savings.
  • In some cases the hardware could be old and expensive. Getting rid of the hardware will save the company some many.
  • Again it is important that you highlight the cost of the hardware is based on estimations which may differ from actual savings.
  • In some cases there could be savings by moving your applications to a cloud based service which will reduce your hardware expenditure.
  • Examples are decommissioning of old hardware, combining of servers.

Software Cost Savings

  • Another one of the typical benefits in an IT Project and are part of the IT project plan.
  • Many IT Projects are formed to get migrate old software which need high maintenance. 
  • The new software can save costs as it could be low maintenance.
  • The project could replace two similar software to reduce the licenses costs.
  • In some cases the project may replace the existing propriety software with an open source software.
  • Examples are reduced license fees, reduced software support costs.

Productivity Gain

  • Automating systems should lead to productivity gain which can allow people to do more work.
  • Introducing system reduces manual tasks so the resources can be diverted to other areas.
  • Sometimes system issues force the users to perform a manual workaround. Fixing the defects may reduce the manual steps and allow productivity gain as a benefit.
  • Examples increased application processing or optimization of resource time.

Process Improvements

  • Projects can improve the time taken for a certain process to complete.
  • This can be automating a simple manual data entry operation or automating a complex claims adjudication process.
  • Improving processes means the time taken to complete a process is less which can save time which will free up the resource to do other tasks.

Intangible Benefits

Audit Finding

  • Some of the projects can be formed due to a major audit finding. 
  • Generally, audit findings are related to either a process not working on no proper controls are in place.

Contribution to the organisational strategy

  • All the projects should contribute to the organisation's strategy is some or the other way.
  • Examples are Increased Market Position, Market Leader in Technology.

Enhanced User Experience

  • Goal of many IT Projects is to build a sophisticated UI or Interface which can help system users to easily use the functionality the system provides.
  • If the system is being developed for external users then this benefit could also mean enhanced customer experience.
  • Examples are faster checkout times on websites.

Increased Customer Satisfaction

  • Often IT Projects which are meant to build hardware or software for customers will have this benefit.
  • The project will target to make the partnership between the customers and service providers better.
  • The project could be aimed at providing additional functionality to the customer or an entirely new service.

Increased Compliance

  • Part or some projects are aimed at addressing any systems or processed which will address compliance or audit issues.
  • If an organisation breaches a regulation or compliance measure then the company could end up paying huge fines. 
  • Sometimes the benefit of the project could be increased security for the organisation.
  • Automating a manual process like check posting could save time and reduce human errors.

  • For example fixing a bug which allows private data to seen by by unwanted personal.
  • Example is HIPAA Requirement or Privacy Regulation.

Brand Equity

  • Maintaining a brand name is one of key objectives for a lot of companies. 
  • Some projects aim at improving the brand equity by providing better services and maintain standards.
  • Example is integration with all the major vendors.

How to calculate tangible benefits?

Managing project benefits is a critical part of project management. The senior management within the company will always be interested in knowing how the project will enhance the company profit. We will look at calculating the cost benefit of Resource, Software and Hardware Savings.

Project Benefit Calculation
Project Benefit Calculation

Calculating Resource Benefits

In a typical project resource savings means that after the project is implemented there will be certain cost savings from resources which will be the key benefit. The cost benefits could be coming from reduction in manual work , process improvements, natural attrition or fixing system issues. 
  • In general the resource savings or benefits can be calculated in two ways. 
  • First, an hourly basis which involves taking an hourly rate and multiplying it by the number of hours saved. 
  • Second, an overall resource cost where implementing a project will cause reduction in headcount. In the case of headcount the salary per year should be considered as cost savings.
In both the cases it is easy to get an hourly or yearly cost for a contractor as they are generally hired on a specific hourly rate. For internal employees Cost to Company can be provided by HR  or finance department for the resource. Now lets look at a few examples of how we can arrive at a dollar value for a benefit of resource cost savings.

Benefit Calculation Example 1: Reduction in manual tasks by introducing system changes

In this example for project benefit calculation we will look at a scenario where a project or functionality which will help in sending automatic emails after certain steps in a loan approval process is complete. Follow the below steps to get an estimated benefit :
  1. Get an average number of loans written per day (assume 100 loans).
  2. Get an average number of minutes spent composing and writing an email(assume only 5 mins).
  3. Get an average time to process a loan (assume 60 mins).
  4. Get an average revenue per loan( assume $200).
  5. Multiplying the no. of loans by minutes and dividing by 60 will give you the total time of 8 hours a day.
  6. So, the benefit here is that per month the company will save 160 hours by adding the auto email functionality and that will allow the company to process an additional 160 loans which in turn will get an additional revenue of $32,000 per month
  7. Annually it will be a benefit of $384,000 to the company.
The above method of calculation benefits can also be used for process  improvements, fixing of system issues.

Benefit Calculation Example 2: Project implementation results in natural attrition or headcount reduction

In this example for project benefit calculation we will look at scenario where a system change will reduce the need of manpower which will lead to head count reduction and natural attrition.

For the sake of this benefit example lets assume that the system will replace an old legacy system because of which the people required on the job will be less.

In such cases I would suggest that you be conservative when determining how many workers will be affected. If for example it is 3 people then the savings annually will 3 multiplied by $120,000 ( assuming that is the average salary).

In cases where there is chance to reuse the resources in different departments resource reallocation of resources can be the benefit. The company might be able to reduce the hiring need or do more with the number of people either of which will add to the bottom line of the company profit.

In case of relocation of resources it is difficult to estimate a cost so it better to put the no. of resources. For example 12 resources will be relocated to different departments in the next 6 months.

Software Cost Savings

It is common in the IT world to upgrade or decommission old software which is not used or used less. In the case of software savings benefit we will look at two examples - first license costs and second saving maintenance costs.

Benefit Calculation Example 1 : Replacing the current software with an open source software. 

  • The benefit for this project will be the cost that the company will save on the licensing of the software which is lets says around $300,000 per year.
  • It is important to keep in mind that the benefit for the first few years will be less as the company will spend some money on building or migrating to the open source software.  
  • Also, it is important to factor in any costs related to the product support, hardware etc which are peripheral costs.
Running Costs of Current System
- Licensing Cost : $350,000 per year.
- Product Support Cost : $20,000 per year.
- Hardware Cost : $15,000 per year.

Total per year cost of the current system : $385,000.

Cost to build the Open Source System (one time)
- Software development cost : $500,000.
- Hardware Cost : $20,000 first year.
- Consulting Cost ( Software + Hardware):  $50,000.

Total cost of building the system in the first year : $570,000
Running Costs of New System ( after the first year)
- Product Support Cost : $10,000 per year.
- Hardware Cost : $15,000 per year.

Total per year cost of the new system : $25,000.

The key benefit would be that the company would save $535,000 in the first 3 years and then more than $1,000,000 in the next 3 years.

Benefit Calculation Example 2 : Reduction in software maintenance costs

Reduction in software maintenance cost is one of the most common project benefits. In this example we will look at benefits the company will get when it replaces a complex COBOL system with a open source java rules engine.

As COBOL skills are not available the company has to had to pay the developers expensive salaries and as they know only COBOL they cannot be cross utilized in other areas.

Assuming the COBOL developers / testers cost $150,000 with a team of 4 the cost to the company is around $600,000 per year.  We will assume the hardware costs would be the same.

As an average Java developer/tester would cost around $100,000 with a team of 4 the cost benefit to the company would be a saving of $200,000 per year simply by replacing the resources. Simply replacing the resources is not possible as we need to build the new system.

Assuming that building the system costs $500,000 and the project runs for one year during which both  the COBOL and Java Developers will be needed the company will end up paying $600,000 ( COBOL Team)  + $400,000 ( Java Team) + $500,000 (System build) which is around $1,500,000. 

So, in the next 5 years the project will save the company around $200,000 in resource costs and provide the flexibility to adapt new technology.

Hardware Cost Savings

Is it common for some of the IT Projects to decommission old hardware and replace it with either new or optimize the existing hardware. While the task seems simple the benefit that such tasks can give the company should not be underestimated. 

Lets take an example of where we have multiple servers of rules engine running on different servers built for different departments which can be consolidated in one.

Current Infrastructure Costs
- 5 standard servers which cost the company $5,000 each per year total to $25,000 per year.

Proposed Server Consolidation 
- Move all the services from 5 standard servers to one standard server.
- Increase the server capacity by 100% which will cost $3,000 per year.
- The cost of moving the services and doing adequate testing will cost around $30,000.
- One time service charge for making the hardware changes $5,000.

The total one time cost for moving the servers is $38,000.  The consolidation project will reduce the cost of services to $8,000 per year which is cost benefit of $20,000 per year. 

The project will pay itself in the first two years. Not to mention the benefit of having reduced infrastructure will mean less maintenance. 

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