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Out on a LIMSThe Blog for People Who Risk Life and LIMS on a Daily Basis

The Illusory Cost-Benefit Analysis

Volume IIIEntry 9 of 36 in 20182 min read2 comments ↓

Written by Gloria Metrick on . Published as written. It may not reflect how these systems work today.

We speak of the cost-benefit analysis to do before buying a system as if it really exists. It's not as real as we pretend it is.

The Difficulties

A recent customer wanted to get some general cost-benefit numbers rather than doing an actual cost-benefit analysis. They just wanted a general idea what types of cost savings were possible and also what areas were most likely to benefit.

There are multitudes of articles that discuss what to look for when doing a cost-benefit analysis. There are almost none that give numbers that customers or software vendors generate. Try looking for a presentation that gives some general numbers and you'll struggle to find them.

In addition, when you do find them, it's sometimes difficult to know which ones might apply to your situation and how closely.

The Reality

Most customers don't do a cost-benefit analysis before buying a system. In fact, I would claim that many systems aren't meant to save money but for other purposes (that do actually sometimes save money), but more for the ability to store and find an increasing amount of data, for example.

For those who do a cost-benefit analysis, they're not that interested in sharing their numbers. That was their effort they put forward and they don't typically feel like sharing it. In addition, the numbers are not often flattering.

One project claimed their ROI (Return on Investment) did end up being positive. That means that, over the time they owned that system, they did not end up losing money on it, considering what they put into it. That was over fifteen years, apparently.

Beware

If you do find numbers, especially if you're at a conference watching a presentation, beware of numbers that sound great. Most of the time, initial numbers aren't actually very good but those people measuring leave out a lot of the ongoing costs. Sometimes, it's because they don't know how to measure them. However, I've been in presentations where I was 100% certain that the vendor presenter was trying too hard to sell their system or the customer presenter was trying too hard to get someone to offer them some type of directorship position after their great "success."

Gloria Metrick
GeoMetrick Enterprises
http://www.GeoMetrick.com/

The conversation

2 comments from 2 people on March 14, 2018.

  1. Jim Jenkins

    I agree, the Cost/Benefit of a LIMS project is difficult, if not impossible, to calculate. The cost side is knowable, but rarely complete in the pre-project analysis - the cost of the software, the hardware to support the solution, implementation costs,.software maintenance fees, training, documentation, validation, direct labor to support the system and indirect labor input to activities like explaining work processes to the business analyst and re-working SOPs to reflect the process after the new system is in place. The benefit side of the ratio is much more difficult to calculate, as the benefits of a system are largely soft benefits. Soft benefits being project benefits whose impact are difficult to quantify; things like a) improved data quality (importing results directly from an instrument rather than transcribing the results onto a worksheet then typing them into a database or spreadsheet), b) reduced time for calculations or data review, c) reduced preparation time for a customer or regulatory audit - as all of the pertinent information is available electronically via the LIMS interface, and d) improved customer satisfaction with the creation or improved functionality of a customer web portal, to allow the laboratory's customers to place orders and access their data at any time. There are many more of these soft benefits that could be included in the benefit portion of the ratio, hard benefits - benefits with a definite and calculable impact - like improved throughput, reduced reporting time, and reduced headcount requirements.

  2. John H. Jones

    You might want to look at the recorded tutorial series that Joe Liscouski has been generating. He just completed the 4th tutorial in a series on Lab Informatics. Tutorial #2 covers ROI. I think there are some gems of wisdom in there that folks may want to look at: https://www.limsforum.com/a-guide-for-management-successfully-applying-laboratory-systems-to-your-organizations-work-part-1/70596/

    This posting provides, the slides, transcripts and actual recorded webinars/tutorials. There are more to come so feel free to look at what is already posted and I think the 5th one in the series is coming out in April or May.

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