Today, more than ever, design engineers must speak the language of ROI in order to get their budget requests approved. And engineering managers, who may be in the process of upgrading entire workgroups with desktop CAD systems, must do the same for the divisional manager, CFO or even CEO.
An ROI MethodologyTo the rescue comes an effective and understandable formula, developed by Autodesk and based on surveys conducted regularly among our users, for calculating desktop CAD ROI.
To keep the formula as simple as possible, we base it on a single-user system, although we do offer a variation of the formula for a single user system that might impact a second, downstream worker. Once completed, the results can be projected to cover multiple systems that will be used in similar fashion to the sample used for the formula (Fig. 1).
The single-user Autodesk formula features these five variables:
New System Cost. This includes the cost of hardware, CAD software and training that will be required for the new system. Typically, this information is available from the system vendor or dealer.
Monthly Labor Cost. This calculates the "cost" of the design engineer to his or her company, and is available from the finance department. It includes salary and benefits, but excludes any overhead costs such as office space, heat or electricity.
Training Time. This requires an educated guess, which can be based on previous experience and discussion with the system vendor. The extent of training required will also depend heavily on the user's current state of familiarity. If this is an upgrade, training might be minimal, down to one month or less. If it is a completely new system, training might take as long as six months. In our own surveys, Autodesk has found that most training programs run between two and four months. An overall average, then, might be three months.
Productivity Loss During Training. This will vary widely, depending on user familiarity with the product and other variables. A fair assumption is that productivity will be lowered by between 10% and 50% for the duration of the training program.
Productivity Gain After Training. This depends on user perceptions of how the new system will improve typical drafting and modeling tasks. Often, "productivity" improvements can be anticipated by users themselves. For example, a vendor demo may show that a new command will eliminate 10 steps previously necessary. This can help the user extrapolate how much time that might save. In general, it's best for users to assess their own typical work week's chores and then evaluate how the prospective new CAD system will help speed up those tasks. Generally, users can expect productivity increases from 15% to 75%. As an example, a productivity increase of 25% would mean that the new software is saving the user an average of 10 hours out of each 40-hour week's workload.
By the formula, the reduction in monthly labor cost is calculated, after weighing the impact of training productivity lost and post-training productivity gained. This value is then divided by the real costs of the system, plus the monthly labor cost, times the training time and the productivity loss during training. The resulting percentage shows ROI after one year--a percentage indicates the return, in terms of labor cost savings, of the original investment.
For example, Fig. 2 shows the ROI for a mechanical engineer who is upgrading from a 2D CAD program, such as AutoCAD, to a 3D program, such as Autodesk's Mechanical Desktop software. Based on the values shown in the illustration, the ROI for the year comes out to 163%.
Learning from ROI ModelingROI modeling is beneficial not just for cost-justifying new systems, but for helping firms understand the real dynamics behind their CAD investments. For example, a variation of the ROI formula can be applied in cases where a second professional may also benefit from the new system (Fig. 3). As an example of a dual-user scenario, assume that the mechanical engineer referenced earlier works closely with a draftperson to produce mechanical designs and drawings.
Not only will the mechanical engineer's productivity increase, but so does that of the draftperson. Reason: the new product can automatically generate 2D drawings from the 3D model. The draftperson's system cost won't increase, since he or she already uses 2D software, but the workload to support the mechanical engineer will decrease by 75%, since the 3D system will automatically generate 2D drawings.
Penny Wise, Pound FoolishAnother valuable insight that can come out of the ROI formula is that the cost of professional labor far outweighs the costs of CAD hardware and software.
The implications of this might seem surprising to some managers: by spending more money on hardware, software and training--by purchasing more memory, for instance, or faster processors, and by optimizing training, say, by purchasing customized programs--the firm might find that ultimate ROI is far higher than if the firm took a barebones approach to its original cost outlays (Fig. 4).
In fact, surveys by Autodesk and others have found that money spent on user training is one of the best investments a CAD department can make. Well-trained users get more from their equipment, and generally work better and more easily, than untrained or poorly trained users (Fig. 5). Also, studies have found that users trained at the start of new product deployment are able to function at higher productivity levels than users trained later in the deployment cycle, who may have developed hard-to-correct bad habits.
A Deeper UnderstandingFor many firms, ROI modeling opens the door to a deeper understanding of desktop CAD economics. Knowing the value of professional labor, firms may opt to spend more on hardware, software and training. Some may hire consultants to help with installation and training, in order to maximize their users' productivity with the new systems.
ROI modeling also promotes an appreciation for quantifying and documenting performance data. By analyzing productivity objectives, for example, and then documenting how effectively those objectives were met, firms are putting in place a performance measurement process that can pay dividends over time. When newer CAD systems are being evaluated, for example, such a firm will have a clearer picture of how much and what level of training will be appropriate, based on its earlier experiences with ROI modeling.
And by taking periodic ROI snapshots, firms may come to see how ROI actually improves over time, as knowledge is captured and reused in new system designs. Best of all, design engineers should bear in mind that calculating ROI can be simple, even if it's not actually fun. It's not rocket science, but it can go a long way in bringing Mars and Venus back into alignment.