CAD Manager's Newsletter (#429)

25 Jun, 2019 By: Robert Green

Calculate the ROI of Today's CAD Software

Unsure about whether you should switch to a shiny new CAD application, or implement an intriguing new utility? The ROI never lies, so start crunching numbers!

In a previous installment of the CAD Manager's Newsletter, we talked about implementing a proactive CAD management program, so problems can be prevented rather than fixed. One of the key elements of that proactive approach is to always keep an eye on which software applications best suit your needs and budget.

But given all the variables involved in selecting software, how in the world can you make the best choices? In this edition, we will explore how to consider cost savings and return on investment (ROI) to make smart software decisions based on financial parameters rather than marketing spin. Here goes.

What Is ROI?

First of all, we need to cover the basic concept of return on investment (ROI) and explain why it is a persuasive tool in your CAD management arsenal. As the name implies, ROI is a way to determine the return you can gain from making a given investment. Any software you spend money on should generate a labor savings amount that justifies the spending. After all, if you're not cutting costs by improving efficiency and saving user time, what's the point of implementing new technology?

To express ROI in equation form, we could say this:


or, in other words,


Looking at the equation, a truth becomes evident: Savings must be greater than the investment in order to achieve a positive return.


And conversely:


Keep in mind that CAD software typically has a working life of several years, meaning that analysis over an extended period — typically three years — becomes necessary.

This all may sound complicated, but it really isn't once you see how it works. To gain this understanding, we'll do a couple of example calculations so you can learn the terms by context.

Example 1: Switching to a New CAD Software Application

Let's say that we're considering switching from our current CAD software application (CAD software A) to a new one (CAD software Z). How will we go about calculating the ROI of the switch? Well, we'll need to know how much time/labor savings we can achieve:

•  Labor savings per year from Software Z = $500

We'll also need to know all the costs associated with making the switch:

•  Cost to obtain Software Z = $1,000/year subscription
•  Cost of training in first year for Software Z = $500
•  Cost of ramping up to productivity in year 1 for Software Z = $1,000

We're looking at these savings and costs over a three-year time span:

•  Savings = 3 years @ $500/year = $1,500
•  Costs = 3 years of subscription @ $1,000/yr + $500 training + $1,000 ramp up = $4,500

Taking all of the above into consideration, our three-year ROI for Software Z would be:

This is an example of a negative ROI, because we will never save more than we spend (Return < Investment). To use an investing analogy, would you deposit $4,500 in the bank to have it be worth $1,500 three years later? I didn't think so.

Read more »

Tools and Resources

Sample ROI Handout and Recorded Webinars Available
For another take on calculating ROI, get Robert Green's ROI Handout that shows an example of the personnel costs of using subpar computers for CAD work, and check out the associated recorded webinars.

What's New at

Sponsored: Lenovo Refines Professional Workstation Designs for Greater Reliability
From Lenovo: A workstation manufacturer discusses the company's strategies to overcome workstation reliability challenges including heat, shock, and the rigors of daily use. Read more »

AutoCAD Video Tips: Try the DWG Compare Tool in AutoCAD 2020
You've probably been in this situation: You're faced with two drawings that look similar, but might not be exactly the same! How can you tell if there are any differences? Join AutoCAD tipster Lynn Allen as she shows you how to get the most out of the updated DWG Compare tool inside AutoCAD 2020. Watch the video »

Herrera on Hardware: Virtual Reality and Augmented Reality for CAD, Part 2
Once you've decided to integrate VR/AR into your workflow, it's time to select hardware that can deliver convincing experiences. Read more »

About the Author: Robert Green

Robert Green

Add comment

More News and Resources from Cadalyst Partners

For Mold Designers! Cadalyst has an area of our site focused on technologies and resources specific to the mold design professional. Sponsored by Siemens NX.  Visit the Equipped Mold Designer here!

For Architects! Cadalyst has an area of our site focused on technologies and resources specific to the building design professional. Sponsored by HP.  Visit the Equipped Architect here!