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Which Software to Use? Let ROI Decide

By Robert Green

It’s a common question in all manner of design environments – software users and decision makers ask which software tools are best for their company. Questions like “Is AutoCAD better than LT” or “Is Revit really better than AutoCAD Architectural” pose two possible scenarios that must be analyzed using questions like, “what do these tools cost and are they really worth it?” Whether you’re a user, CAD manager or project manager these questions can make your head spin.

But when you think about it all these questions are a variant on a single theme: Which software tool is really right for your users and your company?

When you think about the questions from that single point of view the answer becomes simple: Use the tools that make your users most efficient and yields the best return on investment (ROI) for your company.

What is ROI?

Return on Investment (ROI) is simply a way to make complex CAD software purchasing decisions using a data driven mathematical approach. By using ROI your company can make software licensing decisions based on solid business logic, not desire or emotion.

The basic equation for ROI is simply:

So if we think about the equation in terms of software it becomes clear that in order to justify the purchase/license cost of any software there must be a resulting savings from its usage. And since the key ratio in this equation is savings divided by costs the way to achieve the best ROI is to maximize savings while minimizing costs.

Let’s imagine a basic example scenario:

If your company could license a piece of software for $500 per year that would save $2000 in labor costs, then you’d receive an astounding 400% return on your investment as you can see in the figure below.

Why Should You Care?

No matter what role you serve in the organization doesn’t it stand to reason that if you can help the company save time and lower costs via smart CAD software use that your job is more secure? The way you think about CAD and ROI typically depends on your role in the organization with most companies having the following breakdown:

CAD users and CAD managers.  Both groups strive to look for savings opportunities possible with new CAD software technology.

CAD managers and project managers.  Both groups strive to control costs associated with new CAD software implementation.

Senior management.  Serves as a check to be sure savings and cost estimates are reasonable so that high ROI’s can actually be achieved.

Based on your principle job function you can now see your principle role in finding high ROI software work methods boils down to these key action items:

CAD users and CAD managers.  Find new ways to use CAD software to get your job done faster.

CAD managers and project managers.  Make sure the new CAD software works and can be implemented within budget.

Senior management.  Question everything and validate everyone’s math.

Savings: Time = Money

In most design environments a CAD based task duration is measured in the hours it takes for the CAD user to complete the task from start to final markups. The number of hours is then multiplied by the CAD user’s labor rate to compute a total cost for the project like this:

Project Cost = Time (hrs) x Labor Rate ($/hr)

Simply looking at this equation allows us to draw two conclusions:

  • Time really does equal money since time is directly proportional to Project Cost
  • The higher the Labor Rate is, the more the project costs
  • If labor rates remain the same the only way to reduce Project Cost is to reduce Time

Since most CAD users, from drafters to engineers, have high labor rates, saving them time translates into real cost savings for a company. Therefore, if a higher power software tool can be used to save time then it may pay for itself in reduced Project Costs.

The question then logically becomes, “Where are the greatest savings opportunities in your CAD environment?”

Finding and Quantifying Savings

To find the cost saving potential in your company’s CAD environment all users and CAD managers should ask themselves the following questions:

What are my most redundant processes?  If you find the tasks you repeat the most often you’ll find the greatest potential for automation or smarter CAD software to help you.

What causes me to make mistakes?  Errors are often due to human input or math errors which could be eliminated by intelligent design software. If you can utilize smarter CAD software to perform typical civil, mechanical or architectural calculations you should save time that would otherwise be spent fixing errors.

What problems do most other users have?  If you can find CAD software that eliminates problems that affect your colleagues as well as you then you’ve identified ever greater savings potential.

What could I be doing better?  Rather than thinking about only time think about how you could improve the quality of your work product and think how smarter CAD software could help you. Examples could be creating illustrations or renderings for marketing more quickly, finding field clashes in architectural designs or better supporting construction efforts via better land planning in civil designs.

As you perform your day to day CAD tasks keep a notepad handy and record all the ideas you have for saving time, reducing problems and performing tasks with better quality and you’ll be amazed how many great ideas you’ll come up with. And be aware that it is sometimes the small tasks you do over and over that are the greatest time wasters!

A Hypothetical Case

Let’s walk through a hypothetical – yet real world - example case so the entire process of savings identification and ROI computation becomes more clear.

Example company:  XYZ Steel Detailing provides custom design services to a variety of clients. Their workflow uses steel detailers who must produce many sheets of detailed fabrication drawings each week with a typical project load of 150 jobs per year per detailer and these detailers earn an average total compensation of $25/hr.

The company is presently using AutoCAD LT because the cost of licensing it ($360 per year) is lower than the cost of a full AutoCAD license ($1045 per year).

Savings idea:  One of the steel detailers believes that using full featured AutoCAD would be more productive than LT because they could use some public domain AutoLISP programs (which aren’t supported in LT) to automate drudgerous tasks to save time on each job.

To evaluate this case, the following steps were taken:

Benchmarking:  By downloading a 30-day trial of AutoCAD the detailer is able to run some of the AutoLISP programs on a cross section of projects and identifies the following results:

  • An average project takes 12 hours to complete using LT.

  • Using AutoCAD and the AutoLISP programs the detailer is able to complete a typical project in 10 hours – thus generating a 2 hour saving per project.

Savings computation:  Since the detailer’s labor cost is $25/hour then a $50 savings per project (2 hr x $25/hr) can be realized. But the math starts to look really huge when considering that over a year this designer can save $7,500 ($50/project x 150 projects) in costs.

Initial conclusion:  Without doing any detailed computations it certainly seems like the $7,500/year savings would more than justify licensing AutoCAD at $1045 per year rather than LT’s $360 per year but let’s do the math just to be sure.

Compute ROI:

Do You See the Power of ROI?

Imagine how much more persuasive it is to ask for a software license with the above ROI computation than it is to say, “I want some new software” and you will see the power of ROI based decision making!

The ROI Mindset

If your company can find high ROI ideas, like the case of XYZ Steel Detailing above, they will invest in the software because they see a clear return in doing so. The problem is typically identifying the software functionality to provide high ROI savings opportunities and then working those ideas through implementation so they can be fully adopted.

Companies that do well with ROI methods tend to have several traits in common that can be summarized in these strategies:

Users provide savings suggestions.  Who better to find inefficiencies in CAD software that could lead to savings than the people who use the software every day?

CAD/project management teams prioritize.  User suggestions are evaluated by the CAD and project management teams so the suggestions with the highest possible savings are acted upon first.

Senior management tracks savings.  As user suggestions are evaluated and implemented the savings and ROI numbers are shown to senior management on a regular basis.

The company provides incentives.  When great ROI ideas are found and implemented the company provides an award or small bonus to recognize the achievement.

In a short period of time the ROI mindset starts to take hold and everyone from the lowest level CAD user to the highest level manager understands how much money is being saved by using CAD smarter. In a longer period of time a culture of constant improvement (as quantified by ROI and savings) establishes itself and everyone starts looking for ways to improve CAD usage to generate more savings.

Fine Tuning Cost and ROI

The example case of the steel detailer neglected to take into account that all detailers will need to learn how to use the AutoLISP utilities with AutoCAD to achieve project time savings. It is therefore worthwhile to consider the total cost of implementing new software, like the following:

Difference in software cost.  How much more per year will the new software cost?

Implementation time.  How much time will CAD management and/or IT staff need to implement the new software?

Training time.  How long will the user need to be trained to use any new software?

While the difference in software cost is an annual expense (repeating yearly) the implementation and training time is typically only required in the first year of software usage. This means that the first year of any new software implementation will be more expensive than subsequent years so a multi-year analysis of ROI should be undertaken.

It Gets Better

We can now expand our definition of software ROI as follows:

Where Costs Year 1 = Software Cost + Training + Implementation

Where Costs Year N = Software Cost

If several years of ROI values are considered, it becomes easy to draw the following conclusions:

  • The ROI for the first year of a software investment is lower than subsequent years because costs are higher in the first year.
  • If the ROI for the first year on a software investment is good, ROI will only get better in subsequent years as costs drop.
  • The more years the software is used the higher the ROI will be.

Summing Up

Deciding on which software tools are best for your users isn’t a guessing game or just a matter of buying the latest product in hopes they’ll work. By using the time tested ROI approach to analyzing costs and time savings you can make smart decisions that you know will serve your company well.

Of course you’ll have to do some homework to do a thoughtful ROI analysis, but isn’t the certainty of doing the right thing for your company worth the effort?

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