Update Apr 2004

HOW DO YOU PREDICT THE BUSINESS RELATED BOTTOM LINE SUCCESS OF A SOFTWARE SYSTEM? PART 2


In our last circular we pointed out the importance of Usability in ensuring that the Return on Investment expected of a software purchase is realised.

Using the equation below we analysed usability - which we believe to be the most elusive and critical characteristic of software. Although business benefit is actually the most important issue and is the entire reason for buying the software, business benefit does not vary more than about 30% between most competitive software applications in shipping.

For simplicity in this analysis we assumed that all marine software packages for Planned Maintenance and Purchasing offer approximately the same target benefits. However the cost and usability factors differ immensely.

In this letter we will look at costs.

Annual Return On Investment= {Overall Usability X Theoretical Annual business benefit} – {Annualised licence cost+ Annualised Configuration Cost+ Annualised Training Cost depend on Usability+ Annual Maintenance fee+ Annual Maintenance Cost + Annual usage cost based on opportunity cost of time spent by users on the system}

Overall Usability
We addressed usability at some length in our last circular and will address it again in more detail in a subsequent circular.

For this discussion, usability is mentioned in a number of business benefit and cost related areas. For example usability is of primary importance in software training and even more important in its influence on the time and effort expended making transactions on the system.

Theoretical annual business benefit
Theoretical Annual Business Benefit is a vast discussion that we will again address in detail in a future circular. Here we outline the main issues.

Key business benefits of a planned maintenance and purchasing system are:

  1. Effective Management of maintenance, surveys and defects for external stakeholders: That is, regulatory compliance such as port state compliance, and commercial stakeholder compliance such major charterer management inspection approval.
  2. Experience transfer, knowledge sharing and trend monitoring
  3.  Inventory Optimisation for minimum risk and minimisation of non performing assets
  4. Lead Time Management for procurement
  5. Resource management and planning for maintenance and surveys
  6.  Defects management
  7. Purchasing Price Optimisation
  8. Ship shore co-ordination on maintenance and purchasing issues.

As an illustration, the benefit of price savings for Inventory optimisation (item 3) can be between US$5,000 and US$15,000 per annum.
For Item 1, the most important for tankers and other vessels with dangerous or polluting cargoes, the value gained can be a significant factor in the entire commercial acceptability of vessels to charterers.

It is estimated that business benefits in the region of US$80,000 for the above items combined can be expected.

Annualised License Cost
Annualised licence cost is the cost of the software taken as an average annual number on a per vessel basis. It is an easy number to calculate since it is derived from the quoted price of the software. The quoted price is the most scrutinised number because it is a definite cash outlay and because it is easy to measure. As we shall discuss in this letter, license cost comes third, fourth or fifth in importance in the return on investment from software. Typical figures for a licence cost of a PMS and Purchasing system annualised, over 5 years is about US$ 2,000 per vessel per year.

Annualised Configuration Cost

Configuration has a significant effort and cost impact on PM and Purchasing systems. It has an even more significant influence on usability and overall ROI associated with the software.

Configuration is a precision exercise with a considerable know how requirement. Many PMS and Purchasing configurations suffer immense usability problems due to the poor quality of the initial configuration. So it is important to start right from the beginning.

Configuration has an initial phase and a continuing phase.

  • The initial phase involves entering each ship’s information into the system from manuals or from a previous system.
  • The on-going phase occurs if the company wishes to make improvements such as increasing the number of on-board machines monitored for maintenance, improving the maintenance activity descriptions, increasing the number of spares monitored, adjusting maintenance intervals based on results, adding vessels etc.


Whereas the cost of configuration can often be agreed and quantified, configuration has been immensely troublesome for some PM/Purchasing installations.

Here are some key pointers to a successful configuration:

  1. Large lists of data must follow hierarchies and sequences that are intuitive to users. An example to avoid is equipment arranged individually by account codes instead of under a multi tier hierarchical component tree structure of the client’s choice. A non intuitive sequence or list of, for example, ships machinery components leads to a perpetual inconvenience in navigating the system throughout its life as well as errors during the set up of data.
  2.  The system must allow for semi automated data transfer from any previous systems.
  3. The quality of the data entered in the system must be easy to control from a validation standpoint. An example to avoid is a system that cannot manage a master library of components form which to build ship’s systems. Without this each ship’s system is built independently. This results in many inconsistencies and causes accumulation of double entries and bad data. An immediate consequence is inaccurate inventory, with usability problems also prevalent.
  4. Configuration must be easily performed independently of the vendor so as to be sure that the system is continually updated and improved and does not depend on the vendor relationship. This is because data input is very hard to control from a quality standpoint if unsupervised by in house stakeholders.

The quality of configuration is critical to the success of the system, since poor quality data will rapidly increase user frustration and will lead to diminished utilisation.

The annual cost savings form using a high quality easily operated configuration facility designed within the software you buy, can be at least half the annualised licence cost.

Annualised Training Cost
Software training cost is directly related to the degree of intuitive usability designed into the software.

There are two phases of training, initial training and on-going training. The discontinuous nature of ship-board personnel employment and the nature of on board job prioritisation, which obviously extends a lot further than handling software, means that people forget how to use complex software.

The difference in annualised training cost between a well-designed, ergonomic, easy to use software product with task orientation and a conventional product can easily exceed twice the annualised license cost per year.

Annual Maintenance fee
This is a simple figure to compare, as it is a percentage of the license cost. License cost as we mentioned before is very transparent and therefore so is annual maintenance fee. This is typically in the region of US$400 per vessel per year for a typical PMS and purchasing system.

Annual Maintenance Cost
This is the cost over and above maintenance performed by the vendor to maintain the system. This may manifest itself in a variety of types of work needed to maintain the system. Software or hardware usage errors and hardware breakdowns requiring software reinstatement are examples of such an expenses estimated to be about 3 man days per year per vessel or US$600 per year assuming that there is no need to send someone to the vessel. This cost is normally the same for any software installation on board.

The other cost is directly associated with the software and relates to maintenance needed to sanitise data, to synchronise databases, to re-enter corrupted data etc. Many software systems require such maintenance for two main reasons. The fist is that the system contains data and requires handling that users are not accustomed to which result in user errors, the other is that the system has been configured in such a way that normal data updating causes data problems that require intervention.

A cost of between US$2000 and US$10,000 per vessel per year is not unusual for some makes of software which are not tolerant to real world working conditions, and thus suffer frequent shut downs and accumulate data errors.

Both these issues must be avoided and can be avoided by the correct choice of software and configuration. However even this cost is related to usability because many errors are a result of confused users by unrefined software design.

Annual usage cost based on opportunity cost of time spent by users on the system
Each software system requires the expenditure of time for users on board and ashore to operate the system. This is a cost in man-hours for the engineers on board and a vast opportunity cost. Of course the cost of operating any electronic system can be an improvement on an equally comprehensive and accurate paper system. However time spent working on the system is time lost from other duties.

Furthermore, as we have argued in the previous circular, if a user with experience of marine software transactions expects to take 3 minutes to make a data entry and instead takes 6 minutes or more, the particular feature of the system is likely to be abandoned unless absolutely necessary. This is especially the case for engineers aboard and shore and senior deck staff, who have many other priorities. This likely phenomenon caused by the variance of usability can render the business benefits unattainable for any such awkward functionality.

Even if secretarial staff were available or linked in with the vessel, the communication between engineers and secretarial staff would take much more of the engineers’ time and preoccupation than a purpose designed ergonomic system such as Ulysses.

We have timed each PMS and purchasing transaction and found Ulysses’ systems to take half to a third of the time to operate than other marine software systems. This translates to a SAVING in the region of 200 man-hours per year for PMS and about 300 man-hours per year for Purchasing. This in turn translates to a saving 8% to 12% of a chief-engineers working hours for PMS plus about 5% for Purchasing. These figures are quite conservative and greater savings could well be the case.

Surely a chief or a second engineer’s time is better spent on engineering matters and not data management matters. So not only does the saving exceed the annualised licence cost 4 or 5 times, but leaves you with a chief engineer doing what you and he finds he has been hired to do, manage engineering resources and risk.