CAD Manager-The Upgrade Dilemma

31 May, 2005 By: Robert Green

Check your choice with ROI analysis.

In my early days as a CAD manager, I remember getting that Christmas-morning feeling when I received the latest AutoCAD release and installed it as fast as I could. Rapid upgrading was justified in the old days when each new version of a CAD program brought massively upgraded features. These days the metrics of upgrading are more complex, and the improvements to the software are much more subtle. Consequently, the most common question I'm asked when a major software package comes out is: "Should I upgrade to this version?"

 Upgrade Spreadsheet
Upgrade Spreadsheet

I can't answer the upgrade question with a simple yes or no, but I can give you a benchmark by which you can make smart decisions. You must analyze the upgrade process and make a business decision about when to upgrade.

True Cost of Upgrading

At the root of any upgrade decision should be an analysis of the relative costs and benefits. It's easy to get caught up in the excitement of a new release, but I've learned to focus more on the business aspect of the upgrade process. I've also learned that what I think of as upgrade costs can be very different from what upper management thinks. Here's a list of costs associated with a typical upgrade.

Software cost is either an annualized subscription or a one-time upgrade fee.

Time. CAD managers and IT people must spend time investigating, implementing and supporting the upgrade. Some companies consider this a normal part of the job, while other companies don't. Either way, it's useful to estimate the time required. Convert this time expenditure to a dollar figure by using an hourly rate for the people involved.

User training expenses include books, tuition, in-house training sessions you have to create and the like. This cost is easy to miss and adds up if you're training many people.

Loss of user productivity is a cost your management cares a great deal about. Be as honest as you can in tallying lost work time for users as they train with the new software. Users may not come to a halt while learning new software, but they'll be less productive until they acclimate. Again, convert the loss of productive time to dollars by using the employees' hourly rate.

Support expenses. Will you need help from an external consultant or reseller? Will you have to spend a lot of otherwise billable time supporting users during the upgrade? If yes, then account for the expenditure. Be honest and don't scrimp, because very few things doom an upgrade more than insufficient user support during rollout.

Benefits of Upgrading

Once you tabulate the costs associated with an upgrade, identify the benefits to see if they can justify the expenses of upgrading. Historically these are the major areas of benefit offered by upgraded CAD systems.

Increased productivity. Can your company and users leverage new features in the upgraded software to save time each day? Will you be able to get more work done with the same staff? If so, how many hours per month would you estimate that you can save or gain? Now convert the time savings to a dollar basis by multiplying saved hours per year by the hourly labor rate.

Bug and error reduction. Do any problems and bugs with the software version in use cause your company pain? If so, does the new version fix these problems? If so, estimate the annual savings as outlined previously.

Compatibility with collaborative partners. If you work with outside vendors and customers, will the new software version help? Estimate the savings you can achieve each year.

Decision Framework and ROI

You should now have a detailed list of costs and benefits that can be weighed against each other to justify (or not justify) upgrading CAD software. By focusing on the metrics of cost and benefit, you'll avoid the "new software is cool" trap and focus on what your management cares about—ROI (return on investment).

To illustrate, I computed savings for a full year, and costs will also be absorbed in the first year. Therefore, we'll be able to compute an ROI value for the first year of the new software's life span. The basic rule of thumb for determining ROI is to divide savings by cost and multiply by 100% to achieve ROI (savings/cost X 100% = ROI). The ROI value for software upgrades typically must be at 100% so that the savings covers the cost of the software upgrade in the first year of use. ROI values lower than 75% are typically rejected, and you'll need to wait until the next upgrade cycle to analyze the problem again.

It's not easy to achieve 100% ROI with a CAD upgrade, which explains why so many old licenses are floating around. Management's mindset is that a CAD program typically has only a 1- to 2-year lifespan and so must be able to pay for itself quickly.

Present your ROI findings, good or bad, to management for approval before proceeding with your upgrade plans. By presenting an ROI analysis. you give full disclosure to management and you insulate yourself from questions later because you have demonstrated your thoroughness. The upgrade may or may not make it past the ROI phase, so don't take it personally.

Upgrade Barriers

Assuming that you predict a substantial ROI and your management agrees to the upgrade, what sort of problems can derail the upgrade? Here's a summary of common barriers.

Tight schedules. Is the biggest project of the year scheduled for completion during the week of your CAD upgrade? Have you scheduled your upgrade without checking for major conflicts? If you answer yes to either of these questions, you're inviting disaster. Be willing to postpone your upgrade to accommodate work schedules because I'll guarantee that will be your management's priority.

Willing staff. No matter how strong the case is for upgrading, you're in for rough sledding if your CAD community isn't willing to come along. Make sure you communicate what will be updated, when and what sort of training and support resources you'll have available to ease the transition.

Lack of support resources. Does management expect you to install the software and then walk away while everyone magically assimilates the new release? Does management expect you to be 100% billable the week after a major upgrade? If so, you're heading for trouble. If you've followed my advice and budgeted for proper support, management should see what an important component of the upgrade process it is. If management persists in believing you can upgrade without providing support, postpone the upgrade until you convince them otherwise.

Lack of budget. Does management want you to proceed with an upgrade, but has cut out important items such as training materials or time to really investigate and plan for the upgrade? Stick to your guns, postpone the upgrade if you must, but don't upgrade without adequate planning and training.

Upgrade Scenarios

I've used these techniques to guide me through software upgrades since 1989, and they haven't failed me yet. If you analyze a new CAD release or other software based on what it can do for your company and keep the costs down enough to yield a good ROI value, you'll be well served. Avoid the upgrade barriers I've outlined, and your upgrade process will be profitable and smooth and you'll advance your career more than you ever expected.

Robert Green performs CAD programming and consulting throughout the United States and Canada. Reach him at

About the Author: Robert Green

Robert Green

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