How to really achieve ROI

by Arne Oas

A client recently mentioned the return on investment (ROI) that his company expected to achieve by implementing a new maintenance management software. The software vendor calculated an expected ROI of up to 350 percent. The company fully expected to attain the projected savings and used this to justify buying and implementing the new program. Over the years, I have heard this story many times.

Probably the biggest fallacy when implementing a CMMS is the expectation of any ROI from the software.

If you take the time to go over the vendor’s figures, you will find that none of the possible savings come from the implementation of the software itself. The return actually comes with changes to maintenance practices and organizational structure that are put in place around the CMMS. This is true with labor efficiency, inventory control, extending asset life, MRO part consumption, downtime reduction, safety and a host of other areas. The CMMS efficiently captures and stores information about work. Though not as capable, a filing cabinet serves the same purpose.

For example, take energy savings. It’s often quoted that proper CMMS implementation can result in anywhere from a 5 to 20 percent reduction in energy cost. How? There isn’t one thing a CMMS can do to reduce energy consumption. If anything, the computers require more. So, where do the savings really come from? It’s from the proper identification, scheduling and performance of the correct maintenance at the right time on your equipment. Keeping motors clean, changing filters and proper lubrication of bearings all combine to reduce energy consumption.

An often miscalculated area is the extension of asset life. Preventing wear and damage to new equipment through a good proactive maintenance program will significantly extend its life. This is often the greatest savings quoted in the ROI. But for equipment that’s already 20 years old with significant wear and internal wounds, a substantial investment is required to restore structural integrity and extend life.

The main benefit of maintenance management software is to help and encourage the user to focus on good operating and maintenance practices. These are the areas where all the possible savings are derived. And, the savings can be huge.

Finally, companies also fail to take into account the required time to achieve these savings. The savings almost never occur in the first year of operation. Why? First, in any medium to large organization, just the setup, data conversion and training on the new CMMS will probably take six months. Add another six months to get the operation running smoothly. Second, the majority of changes necessary to achieve ROI are business processes and methods. Process changes are organizational or management issues. They take time and manpower to implement.

It’s this misunderstanding of the ROI source that leads companies to be dissatisfied with the implementation of their maintenance management software and the reason they can’t accomplish their goals.

Keep in mind why you are really buying the software, set realistic goals and commit the resources to make them happen.

My response to my customer’s expectation? You currently have a CMMS. What is stopping you from achieving those savings with it?

Arne Oas is the senior consultant for Computerized Facility Integration. He can be reached at 215-918-2165 or by e-mailing aoas@gocfi.com.

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