How Do You Calculate CMMS ROI?

How to Calculate Your CMMS ROI and Tips for Improvement

Senior management is always searching for ways to increase a company’s profit margin and overall value. Some do this by increasing prices while other (smarter) companies find different solutions. 

When considering maintenance, you can work to reduce operating costs and prioritize how to eliminate inefficiencies to increase return on investment and add value to your company. How so? Implementing a computerized maintenance management system (CMMS) could be the key to your success. 

Learn how investing in a CMMS that works to effectively eliminate inefficiencies can add value to your company.

What Is ROI in CMMS?

When talking about CMMS ROI, what we’re really talking about is whether the value gained from purchasing and using CMMS software outweighs the original money invested in the purchase of the CMMS. 

Can you justify the purchase of CMMS software after analyzing the impact it’s had on your company over time?

Learn how to do that here.

Calculating the ROI of CMMS Solutions

To understand and justify the cost of investing in a new CMMS software, you’ll first need to calculate your return on investment. 

You can use many formulas for this calculation, but this simple formula to calculate CMMS ROI is common:  

ROI = (CMMS value - CMMS cost) / CMMS cost 

To determine the value of a new CMMS, consider the benefits gained. To determine the total costs of CMMS software, carefully factor all costs associated with using it.

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Determine the Value of CMMS

Productivity Gains

Calculate technician productivity:

In a study conducted by UpKeep. where 1,000 UpKeep customers provided data about productivity increases after replacing an antiquated maintenance system with UpKeep’s mobile CMMS software, we found:

• 21% increase in technician productivity when switching from paper and pencil to mobile CMMS

• 12% increase in technician productivity when switching from desktop CMMS to mobile CMMS

To assign a dollar amount to these increases in productivity, you need:

1. The average salary of technicians

2. The number of technicians on your team

Then, use this equation to determine the annual ROI of CMMS based on technician productivity:

[{(average hourly salary of technicians) x (working hours per day) x (working days per year) x (# of technicians) x (% productivity increase)] - (CMMS annual cost)} / CMMS annual cost = annual ROI of CMMS based on technician productivity

Follow this example:

1. Average technician salary = $30/hour

2. 8 technicians on the team

3. Moving from paper and pencil to mobile CMMS

4. Cost of CMMS = $5,000/year

{[$30/hour x 8 working hours/day x 261 working days/year x 8 technicians x 21% productivity increase] - $5,000/year} / $5,000/year = 2,000% ROI

Calculate administrative productivity:

Perform a similar calculation as you did for technicians above, but instead estimate productivity percentages for admins by considering the time saved from removing paper or desktops and keeping data in a centralized searchable system.

Tip: Use the free version of UpKeep or trial a premium plan with one admin and a few technicians. 

At the end of a set time, estimate the admin's increase in productivity. Was it easier for them to communicate with technicians? Was it easier to manage incoming work requests? Were fewer phone calls made? Were there fewer redundancies with data entry?

Cost Savings With Spare Parts Inventory

If you have a storeroom that’s managed by a parts manager, estimate an increase in productivity based on how much easier it will be for them to keep proper inventory and stock counts.

For example, when a technician adds a part to a work order through UpKeep, the quantity of that part is automatically updated in real-time in the inventory.

Parts managers can also use UpKeep to quickly create purchase orders and when the purchase order is fulfilled, the quantity is automatically updated within the system.

Utilizing a parts & inventory tool helps reduce unnecessary inventory spend by as much as 10% since parts are replaced only when necessary.

Reduce Equipment Downtime

Unplanned equipment failure (like a faulty or broken part) or planned downtime (like necessary downtime for preventive maintenance) can be detrimental to your company. 

When you use CMMS software like UpKeep, you can have a better grasp on asset management, preventive maintenance, and inventory to help minimize the negative effects of equipment downtime.

Eliminate Cost of Failing Audits

Conducting preventive maintenance audits is a way to ensure your company is producing reliable asset health and function while minimizing downtime and operational life cycle costs. 

Not only does using reliable CMMS software minimize the chance of failing an audit by allowing you to access preventive maintenance checklists, schedules, records, and more, but it also reveals areas where a company’s budget might not be being used effectively. 

According to data from IBM, auditing your preventive maintenance program may help reduce costs by shifting your focus away from tasks that do not reduce downtime.

Determine the Costs Involved With CMMS Software

Cost of Licenses

To find the cost of CMMS software licenses, go to the provider's pricing page. For example, UpKeep offers a handful of subscription and plan options for all customers. 

During your research, you’ll probably find that many providers charge per user. At UpKeep, we define a user as anyone who needs to create and update work orders or run reports — typically technicians, administrators, and managers. If you require “request only” or “view only” access, you receive free licenses. 

For instance, if you choose UpKeep’s professional pricing plan ($49/month) and have five technicians, one administrator, and one manager, the cost of licenses would be $343/month.

Cost of Implementation

Implementation is the cost associated with getting your CMMS up and running, organized, and ready to use. Companies, especially smaller ones, can do this on their own using tutorials and support included with the plan.

However, if you have thousands of assets you need to import or need help organizing your system for future success, the provider offers this service for a fee. 

In either case, time is required for implementation, and time is money. 

The CMMS provider can estimate the length of implementation based on your team size and maintenance responsibilities. You can then multiply this by the hourly wage of the people who will be setting up the software. 

Tip: If you’re setting up software independently, ask the provider if they offer a free training session. At UpKeep, we offer daily account setup webinars and weekly data importing webinars.

Cost of Onboarding

The cost of onboarding is time-based. How many hours will it take to onboard technicians and your team to the software?

Using this information, multiply the average hourly salary by the number of technicians and personnel you’ll be onboarding. Your CMMS provider should be able to provide an estimate of how long onboarding might take.

Tip: Ask your provider if they offer free training. At UpKeep, we offer a daily team training session to make the onboarding process simple.

Cost of Hardware

To effectively utilize your new CMMS, you’ll need a tablet or smartphone to leverage the mobile-friendly functionality.

If you have a large plant, you might install tablets throughout the facility for operators to quickly submit work requests when machines go down. Maybe you’ll be purchasing smartphones for technicians or reimbursing them for using their personal smartphones to log maintenance activity with the CMMS mobile app.

Take this into consideration when determining the cost of hardware.

How to Improve Your CMMS ROI

Investing in CMMS software can be worthwhile. It helps organizations maintain competitive advantages, offers several attractive benefits, and ensures your company is operating as efficiently and effectively as possible. 

But how can you be sure you're using your CMMS solution to its greatest potential to increase your ROI and get the most out of your investment?

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#1: Utilize All of the Features

A great CMMS solution is built with the best features in mind. By utilizing all of the solutions and features offered within your CMMS, you’ll find it’s easily worth the money.

For example, UpKeep offers a handful of solutions that lend maintenance teams a hand in improving ROI, including:

• Preventive Maintenance Scheduling

• Inventory Management 

• Work Order Management 

• Analytics and Reporting 

• Easy Integrations

• And more

#2: Train Employees

Properly training personnel on how to use CMMS software enables them to accurately:

• Identify trends

• Enter data

• Utilize the system to its fullest potential

By doing so, errors are reduced and consistency is ensured.

#3: Utilize Integrations and Updates

Before choosing your CMMS software, check that it easily integrates with your existing tech stack and is continually updated to:

• Improve functionality and performance

• Fix bugs

• Improve security

UpKeep is the leading CMMS in providing tools to integrate your other software to help streamline maintenance and business operations.

#4: Track KPIs

Properly tracking key performance indicators (KPIs) helps provide measurable and quantifiable metrics for evaluating activity performance. 

With UpKeep’s Analytics & Reporting tool, you can pinpoint areas where your maintenance areas can improve, reduce downtime, and save costs.

Quantify the Value of UpKeep’s CMMS Software by Calculating the Potential ROI of Our Platform

Are you hoping to gain an ROI by investing in CMMS software? UpKeep offers a handful of solutions to help eliminate inefficiencies and downtime associated with outdated maintenance management systems. 

When you chose UpKeep, you’ll have access to:

• Streamlined work order management

• Preventive maintenance scheduling 

• Real-time monitoring of assets

• Automatic inventory updates

• Analytics and Reporting

• Simple integrations

• Easy onboarding

• And more

Take advantage of the many benefits UpKeep has to offer and see an ROI with your CMMS before you know it.

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