Return on Investment (ROI) with Scia Engineer
J.P. Rammant, CEO Nemetschek Scia

Introduction

The product looks nice, the functionality is great, the price seems O.K., and yet why would one buy a new CAE software named Scia Engineer? There is a clear financial reason: the financial return on investment will guide you to a decision.

The formula

It is a simple formula

ROI = earnings / investment

If one puts 100.000 € in a bank and the yearly interest is 5.000 €, then the ROI is 5%.
Buying software is a bit more complicated than putting money in the bank.

It is all a matter of a possible productivity gain. Let us focus on the first year after the investment.

The training time is the time it takes a user to become as productive on the new system as on the old one, here shown where the curve crosses the horizontal axis.

The purchase of the software, the training, the productivity changes are all accounted for in the formula, which calculates the first-year ROI for an information technology investment:

(B – ( B / (1 + E)) * (12 – C)
---------------------------------- = First Year ROI
A + (B * C * D) + F

Wherein:

A : cost of software & first year maintenance (€)

B : monthly employee cost (€)

C: training time (months)

D: productivity loss during training (percentage)

E: productivity gain after training (percentage)

F: cost of training sessions (€)

The formula is simple; we consider the ROI for the investment related to one engineer:

• the numerator shows the earning coming from an increase in human productivity after the training in the first year
• the denominator shows the cost of the software including training and the cost of the productivity loss during the initial training time.

If the productivity gain after training was zero (E=0) then ROI = 0. If the productivity gain is 100% (E=1) then the employee cost is cut by half, the ROI approaches 100%.

A real example: purchase of Scia Engineer

A = 6.000 €

B = 5.000 € (the real monthly salary cost of an engineer)

C = 2 months (time to be as productive as before)

D = productivity loss during training 30%

E = productivity gain after training 25%

F= cost of training session (3 days in-company) 3.000 €

The result is ROI = 83%, an excellent return on investment in one year. The consecutive years are even much better (no or little training costs and purchases).

The parameters
Let us take a closer look at the influence of the parameters.

A the investment; the hardware cost being irrelevant, it concerns principally software and maintenance . Depending on the modules, required for the type of structures that will be designed, a cost is set.
For complex structures (e.g. bridge) the software cost will be higher, yet the productivity gain will also be higher.

Let us look at our real example: if all other parameters remain the same and A doubles in cost (from 6.000 € to 12.000 €), then the ROI of 83% will only decrease to 55%. It demonstrates that the price of software – and Nemetschek Scia does not offer the lowest price on the market – does not have such a big impact.

B the salary cost linked to the design activities. It is obvious that it will depend on the project backlog an engineer has to resolve. It also depends on the percentage of time an engineer is actually doing design tasks. Studies have shown that engineers have several tasks; a good time split estimate is

• design work 30%
• reporting 30%
• project management & coaching draftsmen 20%
• various tasks (client discussions, administration) 20%

The Nemetschek Scia software addresses the design work and part of the reporting; to conclude approximately 50% of the time is directly related to using design software. The billing “engineering cost” is estimated at 10.000 € per month (all overhead included) for Western Europe. The higher the cost, the higher ROI will be. But even with low labour costs (e.g. Eastern Europe) the ROI remains high; in our example: if we lower the labour cost by half (to 2.500 € per month), then the ROI decreases from 83% to 47.6%.

C the training time: it is the time necessary to achieve the same productivity level as with the old method (or old software). It is the amount of time spent during training and the time of initial use of the software. Practical experience proves that engineers take up new technology very fast; in a few months they regain their normal design efficiency, followed by a further progress of productivity improvement.

D the productivity loss during the training period. A dip in productivity is normal during the initial time of using new software. One has to get familiar with a new interface, new functions, enhancements, … This effort does not take a long time; even if the productivity loss is very high (e.g. 50% instead of 30%), it has a minor influence on the total ROI (from 83,33% to 71,4%).

E the productivity improvement after the initial period. Once a user is familiar with his new software, he will report productivity increases varying from 20% up to 100%.

How is productivity improvement achieved?

• Training right from the start & leaving bad habits behind
• Use of the productivity enhancement tools that are provided in the software (templates, parametric modelling, active reporting document, import/export of data, …)
• Getting familiar with one integrated software, rather than dispersing attention toindependent smaller packages

The productivity gain is a decisive factor. If it increases from 25% to 35% (+10), the ROI improves from 83% to 108% (+15).

F the cost of training; it is a cost added to the purchase cost. As explained the initial cost is not very critical for calculating the ROI; it is however an important factor to shorten the training time C, and at the same time achieve quickly the productivity improvement E. This is why it is recommended not to spare on training time, and invest regularly in an advanced training or in a project related training on the job.

Conclusion
The purchase cost of new software has the least impact on the expected Return on Investment. The productivity gain has the greatest influence. In the figure hereafter the ROI is calculated for various percentages of productivity increases. One sees that even with a minor productivity increase (around 20%) the ROI is rapidly over 50%. High quality software & good training are a guarantee for the client success.

This memo is based on a white paper published by Autodesk: Return on Investment with Autodesk Revit. It has been adapted for the purpose of Nemetschek Scia Software ESA Professional Technology. Concerning the productivity improvement by applying Scia Engineer, we refer to the Nemetschek Scia white paper on PT Structural Modeller (subtitled: Scia Software for Structural Building Information Modelling S-BIM of June 2004) for a deeper understanding of the implemented technology.

It is repeated here that Scia Engineer is a platform, which more than a product on its own, is the basis for a wide variety of engineering design & detailing applications.