Calculating the ROI of CMMS software

Custodian™ CMMS offers great functions to keep a business on track – especially preventive maintenance and reactive maintenance. By streamlining maintenance to be quicker and more efficient, this CMMS software keeps businesses competitive and productive. Users predict maintenance needs, maintain healthy equipment, identify failing equipment in advance, and more.

With its potency, Custodian does not take long to pay for itself. There is a simple formula available to calculate return on investment (ROI).

Many areas of value

Users typically assess the ROI for CMMS software for one-, three-, or five-year intervals. A one-year calculation that includes initial software implementation costs has a lower ROI because these costs are upfront; full benefits are realized over the long term.

The standard formula for calculating CMMS ROI: simply subtract the total CMMS costs from the full CMMS value, and then divide the result by the same cost amount. Among the costs to take into consideration are the initial CMMS software purchase, the initial implementation (including installation and training), any costs associated with new hardware purchases, and the annual support cost, multiplied by the number of years in the ROI calculation.

CMMS value is the expected reduction in maintenance costs after implementing the software. Estimating this amount is easier by breaking up the potential cost benefits into eight separate categories. By examining the potential for reducible maintenance costs in each category, one can yield a specific dollar amount. For each area, consider the CMMS value for one year, then multiply this annual savings amount by the number of years considered in the full ROI calculation.

The eight relevant categories in which to calculate the value:

  • asset life
  • reduced downtime
  • inventory
  • purchasing
  • quality costs
  • overtime
  • productivity
  • utilities

Determining a tangible value amount takes two steps – estimation of how much annual inefficiencies have cost the organization, and estimation of the degree to which a CMMS system could solve these inefficiencies. The latter estimation is achievable by consulting industry contacts familiar with the software, talking with CMMS vendors, examining industry case studies, or applying existing knowledge of the software.