The Pitfalls of ROI Analysis in SaaS R&D

Why ROI isn’t always the right tool for prioritization

As you implement your PoR prioritization process, you’ll eventually face a moment when senior leaders or board members want to use Return on Investment (ROI) as the basis for difficult R&D prioritization decisions.

Here’s a typical version of the scenario:
You need to choose between (option a) developing a new product feature to open a new market segment, or (option b) modernizing your underlying technical platform to reduce infrastructure costs, improve stability, and accelerate future development. Resources are constrained, so you can’t do both.

In these moments, ROI can seem like an obvious decision-making tool. But for SaaS businesses, ROI is often a poor fit for evaluating all types of work — and relying on it too heavily can lead to damaging long-term decisions.

Here’s why:

• New product features (like option a) often lend themselves to a clean ROI analysis. You can estimate development costs, go-to-market investments, and the potential upside in revenue.

• Platform modernization (like option b), on the other hand, is far murkier. The benefit may be stability, long-term cost efficiency, or developer productivity. The “ROI” is often existential: it’s about survival, not upside. And it’s nearly impossible to quantify in a traditional model.

Unfortunately, if the board or executive team only sees ROI on a spreadsheet, the “shiny” new feature almost always wins. Over time, this leads to technical debt, poor performance, fragile infrastructure, and an erosion of long-term business value.

What Can You Do?

You don’t need to reject ROI — but you do need to broaden the conversation and bring better tools to the table. Here are five concrete actions:

1. Categorize work into three investment types:

   • Maintenance: Keeping the platform stable and functional, which includes everything from bug fixes to platform modernization and pay down of technical debt

   • Sustaining Innovation: Enhancing existing products

   • New Innovation: Creating new revenue-generating features or products

Maintenance and sustaining innovation don’t generate new revenue streams, but they’re essential to avoid churn and protect pricing power. Only new innovation lends itself to classic ROI models.

2. Track how your R&D budget is allocated across the three buckets.
   Underinvestment in maintenance often leads to costly failures and customer churn. If 40–50% of your R&D budget is going to maintenance, you’re in the right ballpark. Be ready to show this data to the board.

3. Reframe the ROI conversation around prioritization of goals.
   ROI analysis can help clarify which strategic goals might yield the biggest return. But once the goals are clear, the PoR should be used to align resources accordingly. The PoR is a goal execution tool, not a financial analysis framework.

4. Use the RICE framework to score and compare work across categories.

   • RICE = Reach, Impact, Confidence, Effort

   • RICE works well even for projects where ROI doesn’t apply, helping you compare feature development, maintenance, and tech investments on a more even footing.

5. Educate your R&D leaders and executive team.
   Help them understand that different types of work require different evaluation lenses — and that decision-making should be grounded in prioritized goals, not one-size-fits-all formulas.

Up Next: One tricky situation arises when the team has historically operated under a top-down culture, with little real ownership of plans or outcomes. In the next post, we’ll explore how that history can complicate adoption of the PoR — and how to turn it around.