CMMS ROI calculator
to cost justify your CMMS software.
ROI Calculation for CMMS Projects
A Return on Investment (ROI) calculation results in a value that
represents the benefits received from a project against the total costs of
the project. That's basically all there is to it, but if you ask ten
different accountants how to calculate ROI the chances are that you would
get ten different answers. A certain amount of "poetic license"
can also be evident, depending on whether the person crunching the numbers
is "for" or "against". This does not mean that it is
impossible to arrive at a reasonable and sensible ROI figure.
If you search around for information on ROI calculation you will find
many examples of "Calculating ROI for IT projects/engineering
projects/training/asset acquisition, etc." You will be seeking to
justify a CMMS but what must not be forgotten is that the principles for
building a business case for any project are broadly similar. The standard
ROI calculation can be simply expressed as follows:
If you need to calculate the annual percentage savings over a period of
years the original calculation can be developed further. Let's say,
In this example the sum of the benefits and costs for each year are
divided by the number of years used in the calculation, (three).
OK - we now have our formulae, but the overriding problem is that some
of the benefits of a CMMS may be intangible. Calculating the costs should
be relatively easy, the clever part is in being able to determine or
forecast what the tangible benefits will be. Many maintenance departments
will not be able to provide an accurate figure for their total annual
maintenance budget. If this total is not available you will have to use
what figures you do have.
For example most departments have a good idea of what they are spending
specifically on overtime. The introduction of a CMMS software usually
leads to better planning of work and the subsequent reduction of planned
versus unplanned jobs should lead to a reduction in overtime levels. You
can then look at the projected ROI on your overtime component alone.
Example A small maintenance department spends £40K per annum on
overtime. With a goal of halving this, it is estimated that the CMMS
software implementation can reduce it to £31K in the first year, £23K in
the second year and £20K in the third year. Implementation and software
costs are 18K for the first year, 8K for the second year and 4K for the
Assuming that the estimated overtime savings are met this means that
you can demonstrate a 53.33% ROI per annum for the first three years on
overtime savings alone. Savings on other costs such as headcount,
inventory and production downtime can be calculated in a similar way.
Ultimately, using this model, the cost of a CMMS software is fairly easy
We actively seek opinions
on CMMS ROI. Please let us know if you found this document helpful or
If you found Bryan Weir's
article above of value, you also have need of two products offer in our
products section, by Bryan. Please review "The
CMMS Selection KIT" and "The CMMS
Insider's Guide ebook"
to top of article
CMMS wrote the original article above and Business Industrial
Network developed the calculator below. Therefore any questions
or comments about the calculator below should be directed to
read disclaimer below. Also, another great cost
justification resource is the ebook, "The
True Cost of Downtime" available for immediate download from this
We start out the process of calculating ROI for CMMS
program by setting a 3 year goal. For example by year 3, the user feels
they should see a 50% reduction in annual overtime cost.
The next step is to enter your estimated cost to
implement the CMMS program each of the 3 years. It should get less
expensive each year.
The final step before pressing the "Calculate"
button, is to enter your current cost for for each category you want
calculated in to the savings and ROI totals.
The calculator will automatically show your cost savings
of 1/2 your 3 year goal for year 1. Year 2 will show cost savings at 3/4
of your 3 year goal, and year 3 will show cost savings figured at
percentage you entered for your 3 year goal.
Holding your curser over underlined areas of the
calculator will display pop up help screens to further explain the
Industrial Network has offered this online CMMS ROI calculator in good
faith. We recognize that there are other methods of ROI calculation and
you must decide for yourself if this one is applicable to your CMMS
selection process. You must also use your own data and Business
Industrial Network (and all associated entities) cannot be held
responsible for the accuracy of any results.