February 2, 2023 | 3 min read How to justify the cost of a CMMS By: Elizabeth Voss Back to blog Guest blog by Elizabeth Mazenko from Better Buys Elizabeth is an editor with Better Buys, a trusted source of maintenance software news and research. Follow her at @ElizMazenko for more on enterprise software and related technology research. Change isn’t easy. So it makes sense that getting people on board with any sort of change comes with a unique set of challenges. This is true in any industry but can be especially true in the maintenance industry. In many cases, maintenance teams still rely on outdated forms of tracking tasks that slow them down, like paper work orders. We get it, you’re already so busy, and switching your process and workflows is probably low on your list of things you want to do. Many times, maintenance managers stick with paper forms for four reasons: They don’t want to train employees on new technology and processes They’ve had issues working with electronic or mobile forms before They need a solution that works in the office and in the field They don’t want to pay for all the features of software when the facility will only use a few of them In this article, you’ll see how to calculate the cost and ROI of maintenance software. You’ll find out how to use that information to convince your boss and their boss that you need a CMMS for your maintenance department. Get people on board with change using this goal-setting template Getting started No two facilities are the same, which means you must understand your company’s current processes and strategies to get a grasp on the benefits of a CMMS. To do this, you should measure key performance indicators (KPIs) of your assets over time. This can include: Revenue and budget loss from asset downtime Inventory tracking and organization An asset’s actual lifespan versus its expectancy Pro tip: The more data you have, the better you’ll understand your benchmarks. In other words, you’ll know what’s normal and what improvement looks like. If the historical data isn’t available, measure your KPIs for at least six months to a year to get an accurate view of your assets’ performance. Next, answer the following four questions to get an idea of how different CMMS features can improve performance and maintenance processes: What data/reports would make the job easier? What information does your supervisor consistently ask for? Where’s most of your maintenance budget going? What’s your desired planned maintenance (PM) to corrective maintenance (CM) ratio? Find the perfect CMMS for your team with this CMMS feature scoring template Calculating the ROI of CMMS software One of the first things upper management will want to know is how a CMMS is going to help them and how much it’s going to cost. The easiest and best way to answer these questions and convince this group of stakeholders is by speaking their language. Show them exactly how a CMMS will benefit them by calculating the return on investment. The bigger the return, the easier it will be to secure the buy-in you need. The ROI of CMMS software is dependent on your goals, and the goals of your facility. There are two ways to accurately calculate the ROI of a CMMS: Total cost of ownership and the value of the maintenance solution itself. Here’s what you need to know about calculating the ROI of a CMMS. Total cost of ownership The total cost of ownership involves adding all the initial costs of implementing the CMMS to the long-term costs of maintaining the solution. When deciding which CMMS to invest in, be sure to ask questions about the following costs: Software costs: Cloud-based software often runs on a subscription model. These fees are often paid per user and follow a tiered structure with each tier offering different and/or more features. When determining subscription fees, think about how many people will be using the software and what level of service you need from the vendor. Additional hardware and software required: Think about how your employees are going to be accessing the software. Tablets, smartphones, and laptops are all great choices, but they come at a cost. Solution implementation services and support: Implementation can include things like moving data from your current system to your new one, setting up workflows and users, and other tools that are needed to make your CMMS operational. Some companies charge extra for this, so factor these costs into your calculation. User and administrator training and long-term support and upgrades: Some vendors charge for training beyond the initial implementation phase. These costs can also include adding, training, and onboarding new users or adding new features. CMMS value The value of a CMMS is easy to see, and implementing one can reduce production costs by 10% and a 10% reduction in operating expenses. However, to get a full grasp on the value a CMMS can bring to your company, you should look at the following metrics: Asset lifespan: Estimated number of years you expect to extend an asset’s life cycle Overtime: Average of hourly labor (including overtime) wasted Inventory: Average amount of time lost due to insufficient inventory Utilities: Amount of budget spent on utilities versus the expected costs when utilities run at peak efficiency Productivity: Amount of time spent on tasks like scheduling and work order management Document management efficiency: How long it takes to create, file, copy, search for and retrieve critical documents Once you have the costs and value determined, you can put the measurements into this formula: CMMS ROI = (Value – Costs) / Cost The positive effect The next time you’re thinking about pitching a CMMS to your boss, remember that it’s much easier to convince someone that something is a good solution when you have the numbers, data, and testimonials to back it up. Ready to pitch a CMMS to your boss? Use this pitch deck template to nail it Check it out (opens in new tab) (opens in new tab)