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ROI Of CMMS Software: The CEO Whisperer

By Jonathan Davis | January 14, 2019

Right away when you look at CMMS, you can think of ways it would make life easier for your maintenance department. Your ability to see the advantages so quickly comes from your hard-earned insights into maintenance and facilities management.

You know the frustration of these efficiency killers:

  • Scrolling up and down endlessly trying to find a work order someone promised they emailed you, only to later learn they sent it to someone else by mistake, but without ever attaching the work order form anyway.
  • Shuffling through paper records to see if a failed bearing is under warranty before being able to order replacement parts
  • Walking all the way across the plant to get a manual to double-check the specific steps you must follow to avoid a routine check on a valve turning into a costly repair

You know these time wasters would disappear with a CMMS Software that centralizes and standardizes work order generation, assignment, and tracking. The software could show you digital floor plans with every asset's location. Click on an asset to see associated work orders, warranties, manuals, critical parts lists, and even current inventory levels for those parts. Worried you're running low? All vendor information is also easily accessible, with current prices and lead times.

But even if you have a CEO with the most liberal open door policy, they're not going to have time to sit and listen to a long explanation of all the different ways CMMS software can help your department. They likely see you as a cost center, which means you’re necessary but don’t directly contribute to the company’s profits, and that means they’re just hoping to get as much out of your department as they can on the smallest budget possible.

If you want to convince them, you have to speak their language. One way is to focus everything down to a concept they already have a lot of experience with, return on investment (ROI).

Definition of ROI

With ROI, you can compare what something costs against the value it generates to determine if it's a good deal or not. The result can be presented as a percentage or a dollar amount. You can use it to evaluate one investment or to compare multiple investments to see which one performs best.

In company front offices, calculating ROIs is a multi-step process involving spreadsheets and standardized formulas. But the basic concept behind it is universal.

It's Monday and a neighbor asks you to come over after work and help him set up his new smart home thermostat. Based on his explanation, you guess it's going to take at least an hour of your time. Before you can say no, he invites you over for dinner that coming Wednesday (he and his wife are excellent cooks) and then to a movie on Thursday, your choice, his treat. Your response? I'll be at your place this evening around eight.

You've just done an everyday ROI calculation. The cost to you is free neighborly labor, but the value it delivers is good food and a free movie. Your neighbor is thinking along the same lines. Not only is it cheaper to feed you and treat you to a movie than it is to pay a company technician to install the thermostat, he gets the additional benefit of having an excuse to get out of the house Thursday, when he wife hosts book club. Neither of you used a special formula or even wrote anything down, but you both made your decisions using the concept of ROI.

When company front offices calculate ROIs, there are generally more variables and higher stakes, so things get a bit more thorough and complex. But the core concept never changes.

First Step: Cost

Calculating the ROI of a CMMS starts with tracking down and adding up its costs. Here, we need to consider both upfront and ongoing. Upfront costs are what you pay to get things set up. For example, implementation includes onboarding, and CMMS providers offer different support packages to help you get familiar and then comfortable with the software. But that's not the only cost because you're also going to be paying employees' salaries while they're learning the system. So, it's the number of employees multiplied by their average hourly wage and then that number multiplied by the number of onboarding hours. Ongoing costs, on the other hand, are what you need to keep things running. The cost of the subscription is the first example that likely comes to mind, but there are others.

Download our eBook to calculate CMMS total cost

Second Step: Value

Next, it's time to look at all the places your CMMS is going to save money.

Good places to look for savings include:

  • Extended asset life
  • Reduced downtime
  • Reduced labor costs
  • Improved inventory management

It's one thing to say CMMS software reduces downtime, but it's another to translate that into a specific dollar amount. If you already have these numbers, that's great. If not, we're happy to help with some industry averages.

Download our eBook to calculate CMMS total savings

Third Step: ROI

Take all your numbers and plug them into a basic version of the formula.

  ROI = (Money Saved - TCO) / TCO

This gives you the return on investment. Remember, this is only for the first year, and your ROI is going to improve after twelve months.

You already know a CMMS is going to help your maintenance department, and now you have a powerful new tool for compressing all your reasons into a number that can be understood across departments and up the organizational chart.  New call-to-action

 

Topics: cmms software cmms ROI


Jonathan Davis

Jonathan Davis

Jonathan Davis started out writing for textbooks before branching out to video games and marketing collateral. He has a master’s degree in journalism and a certificate in technical writing.


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