Yesterday I wrote some reactions (some will qualify them excessive) on twitter about Oleg’s blog article on ROI calculation. Since I’ve started working on PLM this question comes up very often between consultant and specialist discussions but I’ve never had such discussion with customers. It looks more like an extra argument to give to leads when they’re not convinced of the benefits of a PLM Solution. So I wanted to give my explanation of why you shouldn’t spend much time on calculating a solution’s ROI and if you really want to demonstrate an ROI, you have to agree that multiple small projects will definitely help you.
Don’t waste too much time on ROI it just has to make sense
What is the aim of calculating the ROI? is it to understand if you need to implement a PLM solution or not? is it to compare two different solutions? Well, let’s start with the second potential reason. It makes no sense to spend so much time calculating the ROI of a PLM implementation when all the solution should do almost the same thing. They are all said to be flexible in order to implement the requested datamodel, so what really matters is their cost over time and their ability to adapt to, not only your changes, but also the technology changes that are happening in the IT world. Back at the first potential reason about whether or not the ROI should justify the implementation of a PLM solution, if this is really a decision point, it just means you’re not ready for it. Whatever the size of your project and how you split it by departments or teams, it has to make sense for you. Then, you can state if the software is expensive or not. The cost of the software shouldn’t be compared to what it makes you earn.
Focus on visible cost cuts keep the rest as a potential bonus
If you really need to present some figures to the decision maker, come first with real and solid informations about clear cost that you are going to cut if there are any. Easiest way to do that is to split the implementation into small projects. For example we are actually implementing a change management handling with Aras Innovator at a customer site and there we can valuate the cost of PR, ECR and ECN management by measuring the time it takes to manage these processes before PLM implementation and then compare how much time, solution providers tell you you can save.
So my best advice (if I may have enough credit to give any advice) is to split your implementation into small projects, estimate real cost cuts, don’t sum them, it makes no sense. This should be mostly an prioritizing information. And above any other advice don’t be convinced by ROI, be convinced by the PLM concepts and by the technology.