Field Service Software ROI Calculation – a Step by Step Guide
Before we decide to invest in field service management software, we need to gather enough information to prove that the system will be profitable for our business and all stakeholders. Why? Because the first thing your management will want to know is how the system will help to earn or save money. Field service software return on investment (ROI) calculation can answer this question, giving you the arguments you need to defend your initiative.
What is tricky with FSM software ROI calculations?
When calculating ROI for field service management software, you need to be accurate. All the elements of ROI analysis should be measurable and rational. Also, the same features may impact a few areas, so you should be wary of double-counting some results.
Sometimes, you need to gather external information to forecast possible results. It’s worth looking for some case studies from your industry to check what kind of optimizations you can introduce to your field operations. But, as even companies from the same sector can differ, you should still note what is feasible in your organization.
Consider tangible benefits
ROI analysis requires hard data that prove the validity of the investment. When making calculations, it’s worth showing the scale of the problems, and the financial results related to them.
But how can this be done?
To simplify the calculation, we have prepared a list of possible areas that can be presented in ROI analysis for field service management software, and ways in which they can be calculated. Please note that this list can be extended to cover more costs and profits specific to a given business, and related to particular features available in the software system.
Savings calculation for FSM software: ROI analysis
Costs of non-working staff
Unproductiveness can be very costly for any organization. You pay for time, even if no work is done. If we count all the idle time of mobile workers, and multiply it by the average hourly wage thorough the year and expected change, the sum may be surprising. Optionally, you can divide this result by the average annual cost of one employee to show how many FTEs are employed unnecessarily.
number of technicians X (hours at work – working hours) X hourly wage X 365 days X expected % decrease of idle time with FSM software
Reduction of repetitive tasks
By limiting repetitive tasks related to service delivery, you can save on the average cost of a task. Please do not underestimate this crucial measurement. Multiplying work related to the same activities costs a lot. Remember that you do not only multiply valuable activities provided by the solution, but also all inefficiencies that may be reduced or eliminated by implementing field service management software.
number of tasks within a year X average cost of task X expected % decrease of repetitive tasks with FSM software
If tasks for mobile workers are not optimally planned, staff may drive unnecessarily from one client to another, spending money on fuel and wasting time.
average fuel cost of one service X all service visits per year X expected % decrease of fuel costs with FSM software
Call center costs
The more clients, service workers, and dispatchers, the greater the chance of miscommunication. The result is a higher than necessary bill for call center service, which is generally priced per minute of call.
number of phone calls to call center within a year X price per minute of call X expected % decrease of phone calls with FSM software
Total cost of non-compliance with service level agreements
If you provide services to businesses, you are obliged to ensure a high level of service to avoid significant penalties resulting from non-adherence to service level agreements (SLA).
costs of all penalties paid for non-compliance with SLA within a year
Cost of expensive failures
If service is not performed on time, a small failure may translate into a more serious issue and generate even more costs. With an FSM system, you can prevent failures, and plan scheduled maintenance automatically in accordance with manufacturers’ suggestions.
total costs of all issues resulted from inadequate maintenance planning within a year X expected % decrease of these issues with FSM software
Profits calculation for FSM software: ROI analysis
Poor service quality may lead your customers to seek another, more reliable service provider. In that way, you lose your clients and your profits. What if service workers could meet deadlines and visit clients on time? And what if the service could be provided within hours rather than days? Customers would stay with your company with benefits for both sides.
potential annual revenue loss arising from clients who leave the company because of poor service
Even with a brilliant offer, your company needs to prove that it can provide high service quality for customers. Ever more clients expect such high standards, and are ready to pay more for that.
potential margin increase as a result of ensuring high level of service delivery X expected number of customers who will pay higher price
Include intangible benefits too
Although analyzing hard data is highly valuable for decision-makers, defining potential change for particular KPIs is needed as well. Most KPIs are measured because they have a strategic dimension in the long term. By showing that they can be improved, you can demonstrate that the investment has the potential to influence further growth.
What KPIs should be presented?
First-time fix rate
This KPI impact shows how many service visits are carried out successfully at the first attempt. Improvement is possible when we send the right person to the client, and when the technician is informed about the issue to be solved and has the right skillset and tools. No need for further visits to resolve the same issue means better customer experience.
expected number of visits completed at the first attempt / all service visits within a year
- Customer satisfaction
By ensuring a high level of customer satisfaction, the company increases customer retention, loyalty and product repurchase or upselling. We can measure various categories impacting overall satisfaction level by dividing them into fields such as service time, technicians’ skills, service delivered on time and similar, and ask clients to express their satisfaction on a scale of, for example, one to five. This kind of research enables the identification of areas which should be improved.
expected average of all categories/number of categories
To measure compliance with service level agreements (SLA), you can calculate the percentage of service visits closed within the SLA timeframe. But, to have a full overview, SLA should be measured for each type of service separately.
expected number of service visits closed within SLA time / all service visits annually
- Retention rate
Keeping a stable customer base will be reflected in the high retention rate, indicating that customers are satisfied with obtained services and are coming back to buy others. Any fall in this KPI should be treated as a warning that something is wrong with customer experience or service quality.
expected total number of customers retained / total number of customers over a given time period.
Number of customers complaints
Minimizing customer complaints impacts other areas such as greater satisfaction and higher retention rates, and may result from well-assigned tasks and improved business processes.
expected % decrease of customer complaints regarding poor service quality annually
With the right software you can also predict trends and changes in demand for mobile workers, together with their skills divided into service regions. Improved forecasting enables more accurate business planning to identify and satisfy future workload demand.
expected accuracy of the forecasts
Calculating ROI for each piece of FSM software may seem to be a time-consuming way of measuring your processes and gathering data distributed across the company. But we need to remember that a very inconspicuous feature of field service management software may sometimes automate many processes, and eventually lead to significant cost savings.
But avoid being over-optimistic. Introduction of field service management software to your company is not only about new technology, it is primarily a business change. It is good practice to prepare three scenarios – optimistic, realistic and pessimistic, with different expected changes in particular areas. To do that, you need to apply a “what if” strategy to all your assumptions and consider what may happen to lower this particular result.
To be sure that initial assumptions are realistic, analysis accountants or external consultants can be engaged to support the verification process. Moreover, a field service software provider can be asked to provide tailor-made ROI analysis. This all enables a data-driven decision that will boost your business in a controlled and automated way.