PDM ROI Calculator from SolidWorks

by Oleg on November 16, 2011 · View Comments

ROI is an important topic, and many times I’ve seen customers are not focusing on ROI assessment before starting PDM/PLM implementation. At the same time, I always found ROI definition and calculation as somewhat mystical. One of my best slides about ROI belongs to CIMData.

SolidWorks made available PDM ROI calculator. I find an CIMData logo on the website. The following disclaimer proves that methods were reviewed by CIMData: CIMData has reviewed this ROI model and finds its benefits ranges to of CIMData’s ROI research and ROI study undertaken by CIMData. The calculator is free and available on this link. Yesterday, I’ve made some experiments. Take a look on the example of the calculation I’ve made.

What is my conclusion? There is no conclusion today. In general, the logic of the calculator makes sense to me. Some of the assumptions are very straightforward, such as dependencies between annual revenues and time-to-market saving; number of ECOs and risk-reduction saving. Try to play with this and tell me what do think. I’d be interested to know your impression and feeling about the data.  Does it feel right?

Best, Oleg

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Tagged as: Calculator, CIMData, Cost Saving, PDM, ROI, SolidWorks

  • Marc Debower

    How much of that is hard savings? Hard savings being the pile of cash you can point to as savings.
    Versus the soft savings like productivity gains?

    My CFO refuses to consider anything but hard savings.

    - Marc

  • beyondplm

    Marc, I'm a bit skeptical that such type of ROI calculators can give you hard saving numbers. The reason why is simple - the resolution of numbers is too high. In order to get hard saving from ECO management, you need to get down and calculate what is the cost of a single ECO in your company. Or, as an alternative, to calculate what will be saving from optimization of supply or part nomenclature. The thing I recommend is to compare "possible vs. impossible" from the standpoint of process improvement. Let think what customer service won't be possible if you are not having an appropriate access to last drawing information (example in support organization or during the sales process). I hope you get an idea... We can discuss more in deep, if you want. Best, Oleg

  • Marc Debower

    Oleg,
    I share your skepticality about the calculator's usefulness. I have also found it difficult to find a large amount of hard savings.
    I think that PLM software is a necessity at this point, but it is mostly a productivity and efficiency multiplier. Increased productivity in the office are soft savings for my organization, and therefore it makes it much harder to justify, whether you calculate ROI exactly or just take a rough pass at it.
    It would be nice to see some real world examples of how others have cracked this tough nut.
    - Marc

  • beyondplm

    Marc, Let's try split between PDM and PLM. SolidWorks is mostly talking about PDM/Vaulting and some change management. Saving here are probably needs to be compared to the situation where you have "no PDM" or "home-grown PDM". Speaking about PLM - I found examples generally split into two large groups- PLM mega references and process enablement. Mega references are normally focused on showing how "PLM big bang" brings value by replacing multiple existing systems. Process enablement examples are normally more granular. These are very interesting examples and usally shows an unusual use case for PLM ROI... Just my thoughts. Best, Oleg

  • Ed Allwein

    Independent studies by Aberdeen, Accenture, AMR, CIMdata, IBM, Oracle and others have consistently shown that PLM software has a profound effect on increasing productivity and reducing costs. 

    This makes intuitive sense: the bulk of a product's cost is determined before the first unit rolls down the assembly line. By leveraging labor-saving tools like PDM/PLM, management simply amplifies any cost savings or time-to-market improvements.

    In fact, in most cases one doesn't even need to call in the analysts: there are enough studies across many industries to provide a solid foundation for estimating ROI. Simply taking typical results and applying huge "safety" factors still provide very attractive returns.

    Our accounting team developed 5 simple equations for our prospective customers:
     http://www.buyplm.com/pdxpert-...

    These equations use such conservative assumptions that we've never heard any objections to their predicted results.

    Of course, ROI is not just based on increased revenue & cost savings; it's also helpful that our PLM software is designed to minimize our customers' total investment.

    Kind regards.

  • beyondplm

    Ed, did you make any comparison between you ROI calculation and real studies after PLM implementation? It would be interesting to compare results... Can you share something? Best, Oleg

  • Ed Allwein

    Oleg, although we have a standing offer to assist in both pre- & post-implementation analysis, few of our customers spend much time on this type of exercise. Many decision-makers aren't just IN top management, they ARE top management and don't need to formally justify the expenditure. I think the big guys who can afford Aberdeen, Accenture, AMR, CIMdata, IBM, Oracle and others will continue to identify the potential so the CFOs can sleep well. Our customers are happy just to say "yeah, it was a good decision." And I suppose that's all that really matters.

  • beyondplm

    Ed, thanks for the comment! I think you nailed it. Two important components of the decision: 1/CFO sleeps well; 2/IT feels like it was a good decision. So, it is all about feeling and not numbers :). Right? Best, Oleg

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