There are only two ways you can get more for less from purchasing a computerized maintenance management software (CMMS) package. The first step is to find a software package that has features and functions that best match your user requirements, and make maximum use out of this functionality. The second way is to find a package that has the lowest purchase price. Luckily, the two methods aren’t mutually exclusive. That’s to say; to get more for less from your CMMS system, the best approach is to find a package that gives you the most value in terms of functionality for the lowest price.
|To get more for less from your CMMS system, the best approach is to find a package that gives you the most value in terms of functionality for the lowest price.|
The key to getting an accurate sense of value for money when you purchase a CMMS system is to provide as much information as possible as to what your requirements are. It’s also important to do the research and determine what options are available.
Vendors are reluctant to do much more than answer the specific questions posed by their customers for fear that they may be accused of avoiding the question, confusing the customer, or appearing as if they’re trying to pull a "fast one." Unfortunately, this can backfire if a customer feels the vendor was deliberately evading the question, withholding information or providing an inflated estimate.
Suppose for example, you ask a CMMS vendor what a typical install would cost for your manufacturing facility with about 25 maintainers and about 200 other plant personnel. From a customer’s perspective, you’re simply looking for an estimate of value for money. If this will cost under $1,000, then you will have little problem getting this expenditure approved by management. If it costs between $10,000 and $50,000, then you will have to develop an incredible business case and do serious lobbying. If the true cost, all in, is over $100,000, then you will no doubt be looking for another way to make your boss look good.
The vendor perspective may be quite different. How many users will there be and what modules, features and functions will be required? What training and implementation assistance will be needed, including porting data from an old system, integrating with shop-floor and ERP systems or re-engineering new processes? What level of configuration and customization will be expected and when does the package need to be up and running? What hardware must be purchased to run the software effectively? The list goes on and on, in some cases making a 10-fold difference in price.
Any vendor will rightfully be reluctant to give an estimate without all the answers. If the estimate is low, customers will make it difficult to rationalize an increase. If the vendor presents an estimate on the high side to "manage expectations," the customer may feel there’s not enough value for the money, and thus lose interest or look elsewhere. For the most part though, there’s a genuine desire to help the customer understand the rationale behind the pricing. After all, it’s a highly competitive marketplace and it doesn’t pay to enter or sustain a relationship when there’s little trust between parties.
DETERMINING VALUE FOR MONEY
There are three key aspects of any software purchase:
- Product quality (i.e. required features and functions);
- Customer service (i.e. implementation, training, maintenance, consulting); and
- The cost.
A happy customer is one that can enter into a long-term relationship with a healthy and profitable vendor that delivers the best value for money based on these three factors. In fact, this can be quantified to some extent, if a formal request for proposal (RFP) process is followed, involving the weighting and rating of evaluation criteria.
For example, suppose you were to prepare an RFP with about 100 functional requirements, weighted on a scale of 1-10, where is are extremely important and 1 is nice to have. Then suppose you received 15 vendor responses that described how well their software supports the features using a scale of 0-10, where 10 is extremely well supported and zero isn’t at all supported. By multiplying the ratings—times the weightings for each vendor—you can create a score for each vendor as to how well they meet your requirements.
To then calculate value for money for each vendor, you divide the functional requirements score described above by the fixed price quoted. The greatest value for money will therefore be the highest ratio. Of course, there are many other ways to pick a winner. In some cases, they produce different results, but it may surprise you just how often you get the same winner no matter how you manipulate the data (within reason).
For some customers it stops there, but others turn to the savings potential or business case for determining which company [CMMS vendor] will provide the greatest value for money. This is far more difficult though. For example, is it really possible to quantify what advanced features, such as dashboard reporting, condition monitoring, warranty and service level reporting, will generate in savings?
Another consideration is the fixed versus variable costs that may not be obvious. Make sure you convert as many of the variable costs as possible to fixed estimates. For example, get a quote of hours required in addition to the hourly rate for training, consulting, data conversion, installation and other variable costs.
INCENTIVES AND PENALTIES
In order to better associate pricing with the concept of value for money, I’m a huge advocate of performance incentives and penalties. Unfortunately, customers and CMMS vendors out number me alike. In conducting several surveys of CMMS vendors over the past decade, only about 20 percent of them said they would be willing to make their fees conditional on meeting performance targets for their customer’s operations.
For these CMMS vendors, however, the percentage of customers that chose to link fees to performance was low (between five and 15 percent). In a meagre five percent of their client implementations, the participation level drops still further to only four percent of CMMS vendors that were ever eligible for a bonus for achieving performance hurdles. It’s my feeling that rewards and penalties tied to CMMS system performance will increase in popularity.
David Berger, P.Eng. (Alta.) is PEM’s production/operations editor and a principal with Western Management Consultants. He’s also the founding president of the Plant Engineering and Maintenance Association of Canada (PEMAC). For more information call (416) 361-6863 ext. 237; email: email@example.com
or visit www.wmc.on.ca