Virtually every large business started small. As they grew, more and more assets were naturally added. At first it is easy to manually keep track of what needs to be done because most assets were relatively new, many were under warranty and there just were not that many. Now you have your own facilities, hundreds if not thousands of assets or pieces of equipment and maintenance problems seem to be increasing without cause. You accept this increase in maintenance and repair costs by making budget adjustments but at the same time you are failing to realize their is a better way using an Enterprise Asset Management (EAM) system.
Why an EAM is a better way
Let us make an analogy to the way an entrepreneur grows a business. When the amount of customer invoices and A/P increases to the point where you either hire another person or obtain accounting software that could do the job more effectively - you choose software. Why - because you realized time was money and by investing in a purely administrative (overhead) application you get more done in less time freeing up resources for core business activities. Therefore doesn't it make good business sense to manage the maintenance of facilities in the same way? When maintenance, repair and operations can account for 30-50% of all operating costs it makes sense to operate as efficiently as possible. An EAM can help you do this plus it has extra benefits that go beyond maintenance management such as:
- The extension of asset lifecycles through better proactive maintenance methods. This translates to fewer capital investments needed.
- A reduction in overtime resulting in lower labor costs. Preventive maintenance lowers unplanned maintenance or emergency repairs/replacements.
- Lower energy bills. Well maintained assets require less energy to operate. See your utility bills decline.
- Exceptional contract and vendor management tools. No more searching through files or a Rolodex for a contact, service or warranty information.
- Fewer surprises. You will know where all your assets are, what condition they are in as well as their complete maintenance history.
- Increased mobility for staff and management. A hosted or online EAM allows for data access via the web from any location including non-site computers 24/7/365.
EAM Price is not the issue
Was price really the issue when you purchased your first accounting software? The answer as explained above is no. Purchasing an EAM solution is going to allow you to do more with less delaying that next headcount addition as well as lowering maintenance operations costs, reducing capital expenditures and slashing energy bills. Although EAM/CMMS pricing can vary greatly, the cost of most good EAM systems is less than the FTE of a professional maintenance team member. See Tips For Negotiating an EAM/CMMS Contract for additional price considerations.
An EAM system is a viable solution for virtually any business in any industry. From utility companies to Federal and State government facilities to property managers there is a customizable EAM/CMMS solution for your operations. Obviously the more asset intensive your company is the greater the urgency to take back control. Share with us when you recognized the need to professionalize facilities management.
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We mentioned in a prior article discussing How Maintenance Management Affects Trends, that pricing for EAM/CMMS software packages vary greatly as it is dependent on a multitude of factors. This can be sort of intimidating for the inexperienced buyer and it makes it very difficult to measure the value of the product against the needs of your organization. Before we outline some useful negotiating tips let us be clear, price should not be the reason you have narrowed down your vendor list. First and foremost, when choosing a vendor, is to determine the need of your company and what type of solution will best address the pain. Decisions based upon price alone will only bring frustration through out your company and probably some unwanted scrutiny on your decision making abilities.
Why Negotiate
In a perfect world, you and the vendor would naturally agree that you will get X in return for Y. A handshake seals the agreement and business is done. However, the reality is little more complicated. Purchasing an EAM is more than just receiving a set of disk and reading an instruction manual. There is work to be done on both sides to ensure the software is implemented correctly. This may include understanding the EAM work flow, training needs, customization requirements and the desired timetables for installment. What must be negotiated is the value assigned to each of these components as well as the determination of accountability (who will do what).
Negotiation is important for several reasons which include but are not limited to:
- The willingness of a vendor to negotiate is a very strong indicator of the value they place on your business. Similarly, your willingness to negotiate indicates the type of client you are likely to be. The more difficult a client is likely to be the higher the account maintenance costs will be.
- Negotiation builds the relationship, enhances communication, allows for faster issue resolution and reduces nickel and dime frustrations.
- Negotiation builds respect when done properly.
Points of Consideration
An EAM will become an integral part of your asset management by helping you to manage assets from the planning stage through the eventual asset retirement or replacement. Because of this, there are numerous points to consider when seeking a vendor partner for your facility. Some of the more notable points you should consider are:
- Software as a Service (SaaS) vs. On-Premise? The key is to find the balance between internalization and practicality. Two common choices are:
- A hosted SaaS, this is when the EAM/CMMS software is run on the vendors equipment and is accessible through a web browser. This SaaS solution makes it easier for the vendor to maintain updates. Subsequently, data center and other support cost are built into the pricing. However, the costs for a SaaS CMMS or any SaaS solution has significantly lower IT financial outlay.
- An on-premise solution where the purchasing facility hosts the software on its equipment. The customer may incur additional costs for server software, SQL database, networking or backup/redundancy plans. This places all the burden onto the customer. When choosing this option make sure your IT department is sufficiently strong enough to implement and maintain the increase in work. If it is not then a hosted CMMS may be a better solution.
- What are the project management variables? These variables cover analysis, consulting and customization needs. Best of Breed vendors will provide these services at a cost as they required skilled professionals. Buyers should not expect these services to free but can minimize the expense by understanding their workflow and knowing what is needed from reports to design of use.
- How much EAM system training will be required? EAM/CMMS systems are powerful tools but there success as a tool is dependent on their ease of use, an understanding of how they work as well as measuring the results. Training is needed for administrative staff as well as the end users. A lack of training will result in lower adoption rates and limited utilization resulting in lower than anticipated results.
- What hardware will be needed? A SaaS solution may only require the purchase of mobile handheld devices (a must for most facilities), in contrast, an on-premise setup may require addition servers or storage capacity. In addition there is likely to be a higher internal IT labor cost associated with the implementation of an on-premise solution
Every facility is different, has unique needs and is managed differently. The correct solution is one that best addresses the organizations needs as a whole. Vendors have adjusted to this by offering a variety of packages. Prudence and due diligence are the buyers best friend.
Tips
There are countless books on negotiating and the art of securing the best deal possible. The more enlightened approach is to understand that if both parties do not feel there is a win-win a long term arrangement is ultimately doomed. A negotiation is an agreement to form an alliance (regardless of length of time). Some useful tips are:
- Do not draw lines in the sand, everything is negotiable.
- Negotiate on value not price. Both parties have a gross profit margin or ROI to achieve.
- The Devil is in the details - know the details of what you are agreeing to. Do not rely on an outside party assurances. Make sure you understand the ongoing costs for maintenance , upgrades and training. The object is to avoid surprises.
- Involve people who understand the business you are in in the negotiations. An EAM/CMMS system affects the entire company, hence, someone who understands the value an EAM system adds and how it will change the workflow is very important.
- Have the negotiations completed (agreed upon) before sending contracts to attorneys for review. The less work they have to do the less expensive and faster implementation can begin.
Deal Breakers
There is an old adage that says "nothing ever goes according to plan." The most notable deal breakers are a result of not following the tips above. These include:
- Making unreasonable upfront demands such as freebies or discounted pricing will have the vendor walking out the door.
- No flexibility in pricing schemes. For example, insisting the client accept a user named license structure and not recognizing that a concurrent user based schedule maybe more appropriate. All pricing options must all be on the table.
- Letting attorneys work out the details if using outside council. This will drive up costs and can possibly change the dynamics of the deal.
Concluding The Deal
Signing an agreement is just the beginning of the process. Vendors and buyers should feel they are in a partnership together. When both parties feel like they have accomplished their objectives you have created a win-win situation. The sustainability of every vendor is dependent on the successful use of their software. Tell us what you would like to see when negotiating for an EAM/CMMS.
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Register for your chance to win a Free EAM & CMMS Worth $23,000
If you want a EAM & CMMS system, but can't afford to implement one this budget year; then this contest is perfect for you. We are offering a chance to win a FREE EAM & CMMS software suite. Contest includes a 1-year site license, 10 web/mobile licenses and support, as well as, training and implementation.