How do you justify the cost of purchasing a new CMMS system?

Facility Management

Justifying the cost of purchasing a new CMMS system can be done by comparing the value that the CMMS adds to the company, to the total cost of the CMMS system.

Total cost of the CMMS
The total cost of a CMMS system is relatively straightforward to calculate – this is usually defined as an outright cost by a CMMS provider. With the availability of software as a service (SaaS) and cloud technology, CMMS costs are now commonly in the form of a subscription fee (e.g. monthly or annual subscription fees).

Value of the CMMS
The value that CMMS adds to an organization is not as easily measured. At a high level, CMMS aims to perform maintenance processes more efficiently, thereby allowing cost savings from reduced failures and increased uptime.

Having a CMMS system can significantly add value to key areas by providing a systematic approach to performing tasks. The following list briefly describes how a CMMS system addresses these key areas. The sum of savings gained after implementing a CMMS system approximates the value of the CMMS.

  1. Asset Lifespan – extend an asset’s lifespan by scheduling preventive maintenance tasks efficiently
  2. Overtime – forecast labor hours effectively by reducing overtime due to inefficient work order management
  3. Inventory – optimize inventory management by having the right amount of stock at the right time
  4. Downtime – reduce production losses due to unscheduled downtime
  5. Utilities – reduce utility costs by scheduling preventive maintenance tasks that allow equipment to operate at peak efficiency (e.g. HVAC systems operating efficiently reduce gas and/or electricity consumption)
  6. Productivity – automate manual processes to allow employees to focus on more productive tasks
  7. Document Management – reduce the time it takes for retrieve documents

Calculating the return on investment (ROI)
Given the total cost of a CMMS system, and the estimated value of the CMMS, the ROI can be calculated to characterize how much the benefits outweigh the costs. The formula for the ROI of a CMMS is given by the following equation:

ROI = [(CMMS value – CMMS cost) / CMMS cost]

CMMS reduces inefficiencies by eliminating manual time-consuming processes. It also helps to increase safety by keeping assets in check. These benefits are obviously sought after by organizations. Calculating the ROI is a powerful metric that quantifies these benefits to highlight the cost effectiveness of having a CMMS system.

Want to keep reading?

Good choice. Here are some similar articles!

What Is On-Demand Facilities Management?

On-demand facilities management focuses on delivering facility management support and services in temporary and unusual circumstances.

Facility Management
View Article

What Is Facility Management?

Facility management is the coordination of everything keeping a business' physical buildings, systems, and assets running.

Facility Management
View Article

What is facility management sustainability?

Sustainability is the “ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.”

Facility Management
View Article

Sign up for a personalized tour today.

Information is 100% secure.
UpKeep logo

Sign up for newsletter!

Our newsletter full of inspiration, podcasts, trends & news.

UpKeep logo

Sign up for newsletter!

Our newsletter full of inspiration, podcasts, trends & news.

UpKeep icon
This website uses cookies to ensure you get the best experience. Privacy Policy